3.4.6 Difficulties in measuring poverty Notes

Measuring poverty is a complex and challenging task due to its multifaceted nature and the limitations of measurement tools. Resultantly, there are several difficulties that arise when measuring poverty, mainly:

1. Measurement problems.
2. Manipulation of poverty lines.
3. Regional cost of living variations.
4. Lack of depth in poverty lines.
5. Subjectivity in reporting.

Measurement problems

1. Exclusion of wealth and savings:
   1. Income-based measures (such as poverty lines) do not account for wealth, which people may rely on during economic hardship. Therefore data could display lower poverty in an economy than that in reality, where wealth is also an important factor.
   2. On the other hand, a lot of families have savings or other types of wealth accumulated which they may use if their income stream decreases. Resultantly, the measures which only consider income, unaware of this information, mark these households as living in poverty.
2. Household surveys:
   1. To collect poverty measures, economists rely on household surveys. The data from these surveys is later extrapolated to the entire population.
   2. However, homeless individuals or institutionalised populations, often among the most affected by poverty, tend to be excluded from these surveys, leading to underestimates.
   3. On the other hand, those participating in the underground economy may not fully report their income earnings, leading to overestimates in some cases.

Manipulation of poverty lines

1. Government overestimation:
   1. Governments may inflate poverty lines to demonstrate a higher proportion of people in poverty.
   2. This could be potentially done to attract foreign aid or multilateral assistance.
2. Government underestimation:
   1. Poverty lines may be lowered to reduce the official number of people living in poverty.
   2. This may also be done, since it allows governments to allocate fewer resources to poverty reduction efforts.

Regional cost of living variations

1. Urban areas often have a higher cost of living than rural areas.
2. National poverty lines may exclude many urban poor who struggle to afford basic necessities like food and housing.

Lack of depth in poverty lines

1. Poverty lines only indicate the proportion of people below them.
2. They do not reveal how far below the poverty line individuals fall, which is critical in assessing the severity of poverty.

Subjectivity in reporting

1. Household survey data often depend on subjective responses, where individuals may interpret their economic situation differently.
2. This can lead to inconsistencies in the data, especially when it comes to making comparisons across countries.