Understanding Poverty: OECD/EU Measures

Poverty Definition

• Poverty is a state or condition where an individual or household lacks the financial resources to meet basic living standards.
• Defining poverty is complex, with no universally accepted measurement.
• A person is often considered poor if they lack resources to meet an "acceptable" standard of living, though this is subjective.

OECD/EU Poverty Measures

• Poverty is defined as a household income below 50% (or 60%) of a country's median income.
• The OECD/EU poverty rate is calculated by comparing the income of an average-sized family to the median household income of the entire population.
• This measure includes the whole household, encompassing students.
• It is tied to each country's average income.

Disadvantages of OECD/EU Poverty Rates

• Doesn't account for regional price differences within a country.
• Ignores food requirements and social inclusion factors.
• Only measures income and doesn't include subsistence farming.
• Limited to OECD countries (primarily Europe).

World Bank Poverty Line (WBPL)

• Poverty is the average minimum cost of nutrition, clothing, and housing required in the 15 poorest countries.
• 1990: $US1 per day per person (PPP)
• 2001: $US1.08 per day per person (PPP)
• 2008: $US1.25 per day per person (PPP) (larger sample)
• 2015: $US1.90 per day per person (PPP)
• 2022: $US2.15 per day per person (PPP)
• 2023: various multi-rate measures.

Disadvantages of WBPL

• Only measures income, ignoring education and subsistence farming benefits.
• Adjustable for different countries to account for varying costs, but doesn't adjust for differing needs.
• Based mainly on 15 poorest countries (mostly sub-Saharan Africa).

Measures of Poverty

• Relative poverty: Comparing a person's income to others within the same region, nation, or group.
• Absolute poverty: The total number of people living below a designated poverty line.

World Poverty overview (2022)

• 9.1 million people in the world lived below the monetary poverty line in 2022. The poverty rate is 14.4%.
• The poverty rate in France in 2021 was 15.6%.
• In 2021, 700 million people globally (8.5% of the population) lived in extreme poverty (less than $2.15 per day), half of whom lived in just five countries.
• In Europe, more than 122 million people were at risk of poverty and social exclusion.
• The Pacific is the world's thir d poorest region, after Africa and South Asia

Melanesian Poverty

• People in Melanesia (Pacific Islands) are often poor, but don't always live in extreme poverty.

• Subsistence fishing and farming reduce malnutrition and provide a table full of fresh food.

• In 2001, Fiji found that subsistence farming accounted for a significant portion of their GDP, and 70% of their workforce is involved in this sector.

• Remittances from workers abroad play a crucial role for many Melanesian families

• Poverty reduced by international aid, NGOs, and debt cancellation.

• Poverty rates in Vanuatu 10.8%, Solomon Islands 18.7%, Timor-Leste 30%, and PNG 38%

• In Melanesia, wealth is often measured in items like pigs, yams, and shells, which works well in local communities, but hinders access to essential services such as healthcare and education.

• Globalization has led to an increased need for cash, but many Melanesians lack reliable jobs due to climate change making fishing/farming more difficult. Climate change + lack of cash for essential services compound the challenges.

Causes of Poverty (School related)

• Lack of quality education/Meaningless lessons
• Weak connections between learning and the job market
• Lack of trained teachers
• Students in remote areas
• Poorly educated parents Disparities in education for boys and girls

Causes of Poverty (General Overview)

• Unemployment (35%)
• Single-parent families (35%)
• Unemployment among single women with families (72%)
• Farmers, entrepreneurs, and craftspeople (23%)
• Workers/employees (18%)
• Retired People(8%)
• Executives (3%)

Causes of Poverty

• Institutions (e.g., police, education, transportation, healthcare)
• Culture (e.g., religion's influence on self-reliance)
• Geography (e.g., agriculture, soil, climate and disease)
• Natural resources playing a double-edged sword( positive in countries with good institutions, but negative in countries with corrupt institutions).