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The Evolution of Poverty Measurement - with special reference to Canada Lars Osberg Economics Department, Dalhousie University Workshop on Low Income,

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Presentation on theme: "The Evolution of Poverty Measurement - with special reference to Canada Lars Osberg Economics Department, Dalhousie University Workshop on Low Income,"— Presentation transcript:

1 The Evolution of Poverty Measurement - with special reference to Canada Lars Osberg Economics Department, Dalhousie University Workshop on Low Income, Poverty and Deprivation Statistics Canada, Ottawa February 12, 2007

2 How has measurement of poverty evolved over last 30 years? Why do we want to know how much poverty there is?  Objective is to inform policy debate A ‘macro’ indicator – how much not who  Compare outcomes across jurisdictions or over time as evidence for policy formation This paper – trends in Canada + international methodology literature What is the relationship between poverty, social exclusion and the denial of human rights?

3 The “Low Income/Poverty Line” Income in Canada– 1976 to 2006 LICO - % income spent on necessities LIM – 50% median Subjective (Leyden)  “Barely adequate”  “Make ends meet” Market Basket  HRDC  Fraser Institute Because real median incomes increase ≈ 0, all updated for inflation only

4 Not much change & fairly narrow range – in 2006 $ [Fraser Institute an outlier – “extreme deprivation” concept] 4 person household Low Income/ Poverty Line - urban area of ,000 rural ratiosingle ratio Statistics CanadaLICO base29, Statistics CanadaLICO base34, Statistics CanadaLICO base (63%)34, Statistics CanadaLICO - IAT 1992 base28, CCSDhalf average income31, Senate Committee(basic needs+30%)*avg growth35, CCSDupdated to 2004**35, Senate Committeeupdated to 2004**39, Statistics Canadasubjective -"barely adequate for daily living"22, Statistics Canadasubjective -"make ends meet"35, Statistics CanadaLIM 50% median market income29,10012 LIM 50% median before Tax34,00012 LIM 50% median after tax29,60012 Sarlo / Fraser Institutemarket basket20,320 HRDCmarket basket*27,

5 Axioms, Aggregation & Dominance – measurement since Sen (1976) Distribution Sensitive Poverty Indices  SST = FGT 1 (1+G(g))  SST = (r) (g) (1+G(g i )). Average Poverty Gap ratio often ≠ poverty rate Inequality of poverty gaps is empirically unimportant Axiomatic basis of Indices Transfer sensitivity axiom important BUT others ??  Focus – relative poverty lines cannot qualify  Impartiality – group identities of poor irrelevant  Continuity – no “threshold effects” – by assumption Equivalence scales  LIS scale now common Stochastic Dominance of Deprivation Profiles  Restricted dominance is relevant criterion Poverty among the Elderly ?

6 Time and Poverty Spells Annual accounting period – too long & too short No cash & no credit? – very cold in much less than a week Immediate Needs - historic focus of social policy – now downgraded Human Rights perspective implies short term deprivation matters Stress may trigger events with long term consequences Long term poverty, culture of deprivation & inter-generational impacts ? Long term poor – clearly the most deprived  Now the focus of “Human Capital” emphasis & “Social Exclusion” discourse Individuals flow through sequence of households  Poverty spell entry, exit and recurrence implied by real time changes in both incomes and household composition  Panel data + {assumption: equivalence scale + no transactions costs} can generate individual life histories of equivalent income poverty spells Costs of volatility & insecurity in health, well-being & human capital not now recognized

7 Sen: Commodities are needed for capabilities, which enable valued functionings Poverty = deprivation of capabilities Relative income can determine absolute capability – e.g. bicycle / car travel Capabilities <= $ income + “social wage” + context Problem: “capabilities” = opportunity set, ≠ observed choices Multidimensional Poverty indices measure achieved functionings Can look within households  What is critical value of specific item deprivation?  How to aggregate over single / multiple deprivations?  Correlation of attributes is crucial Little information added if highly correlated with income, but “too low” correlation implies separable issues involved  Measurement error biases towards chance correlation

8 Social Exclusion – ‘prevented from participation in normal activities of society’ Example of transportation  Income poverty – not enough cash to buy bus fare ?  Capabilities approach – might ask: is there a bus route? To where? Is it wheelchair accessible? – but capability is fundamentally an individual attribute  Social Exclusion – accessibility planning seen as an issue of community design Determines feasibility of employment + access to social life & public services – many feedback effects of isolation Multi-dimensional, mixed indicators, threshold & feedback effects, long term deprivation crucial Social Exclusion – a relationship of society & the excluded  Measurement Implication – both personal attributes & social context of individuals are crucial to social exclusion & poverty

9 “ Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services” UN Universal Declaration of Human Rights (1948) Article 25 Human rights  Specified by Constitutions & International Covenants Clear legal origin, specificity & procedural legitimacy in democratic institutions  Indivisible & interdependent  E.g. Right to privacy is empty without right to housing  Imposes obligations on state parties  Typically seen as either/or condition Head-count measure of deprivation ?

10 Complexification & its costs ?

11 What’s different? Specific issues – e.g. homelessness, nutrition, transportation – not new  can be framed in income poverty, capability, social exclusion or human rights terms  But these perspectives differ in treatment of: Time – current deprivation or long-term? Continuity – threshold effects important? Aggregation – sum index (rate) or deprivation-weighted ? Social Context – central to concept of exclusion, rights


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