THE BLOG
11/05/2014 06:16 pm ET Updated Jan 05, 2015

How Not to Measure Poverty

In a recent satirical sketch on Saturday Night Live, a bearded do-gooder man seeks to help an unidentified village somewhere in Africa on behalf of a charity named HelpFund. They need your help, the man announces and for "only 39 cents a day, you can provide water, food and medicine for these people. Just 39 cents -- that's less than a small cup of coffee."

"Ask for more. Why start so low?" one village man complains. Someone else jumps in and goes a bit further: "Why can't it be the price of an Arizona Iced Tea? Those are 99 cents." In response the man emphasizes, frustratingly, the same thing: "Thirty-nine cents, that's all these people need to survive. And they will be so so lucky and appreciative to get it."

"If he said a dollar, I could see how he got there" the village man ponders as he tries to understand how 39 cents -- which "is not even a round number" -- came about.

The man here to help seems determined to peg the needs of the entire village by his mundane life. He speaks in a language his audience understands back home. What "these people" want or desire is trivial, if not besides the point. Why shouldn't anyone forgo a cup of coffee to save a life or lives? Simple, easy and cheap, you too can become a savior! See how we humans are naturally good, altruistic and selfish all at once.

The problem is that the 39 cents is arbitrary and whimsical, and doesn't reflect the needs of those he seeks to help. This satirical sketch exposes many other problems with the aid industry such as our celebrities turning into development economists, experts on poverty and pundits on all things African. You could call it the celebritization of Africa's development.

But there is another larger problem: the 39 cents is symptomatic of how flawed poverty measurements are. Who says that all you need, anywhere in the world, is just 1.25 USD per day or 39 cents to not live in extreme poverty? Be it in Botswana or Congo; India or South Sudan; El Salvador or the Philippines.

Poverty is a combination of many things, none of which is reducible to a few quantifiable dollars. It is also about human experiences, feelings, relations with others, humiliations, exclusion and of course lack of basic economic needs. Of all things poverty is, it is certainly not just a number of dollars which some unknown "educated and caring people" craft seating in glass tower somewhere in Manhattan or Washington, D.C. Though Income does matter and is an important component, poverty is much more complex and complicated than that. Current methods of measuring poverty such as the "1.25 dollars a day" fail to capture the complexities of poverty, which in turn make it hard to tackle it appropriately. It's highly unlikely, if not utterly absurd, that all "these people" need is your morning cup of coffee.

This complexity is the reason why we don't even know the number of poor people in the world today. Existing figures by the World Bank and the United Nations point to 1.2 billion people in the world who are poor. But a new report using new methods claims that there are 1.6 billion. The way poverty is measured is to blame. To be sure, it is a tricky business to measure poverty everywhere and there is no easy way to do that. But because there is no solution yet, we should take the simplified versions with a grain of salt.

The new report by The Oxford Poverty & Human Development Initiative released a new index named the Global Multidimensional Poverty Index 2014 (MPI) that is being touted as offering a better picture of global poverty. It studies not just income levels but also other important factors of poverty which current income-based measurements fail to capture. By solely focusing on income levels, these "old-fashioned" measurements fail to factor in other important variables such as education, security, inequality and so on. Every country is considered as a homogeneous whole, while in reality there are huge variations within individual countries and between countries. The index, its authors say, "assesses the nature and intensity of poverty at the individual level, by directly measuring the overlapping deprivations poor people experience simultaneously".

Instead of focusing on income, the index focuses on things like access to education, nutrition, electricity, safe drinking water, sanitation, flooring of your house and cooking fuel (whether or not you use wood or charcoal for preparing food). A person is "multidimensionally poor" if they are deprived in at least one third of the weighted 10 indicators. They are destitute if they are multidimensionally poor and lost one or two children. The MPI report notes that its study spans 108 countries and is home to 78 percent of the world's population. Thirsty percent of them -- or 1.6 billion people -- are identified as multidimensionally poor. By this new index, there are 400 million more people in poverty than previously thought. This new flock to the rank of the poor who were previously unaccounted for tells us something about the state of current methods of measuring poverty.

To measure poverty, there's need to devise more sophisticated ways of capturing those individual experiences of "deprivations" to supplement the obvious lack of access to a wide range of modern amenities. Many poor people live in rural areas -- 85 percent of them by this report estimate -- where subsistence farmers live by what they grow. If you measure poverty by income levels only, you get a twisted picture: They obviously earn little to nothing. But they might still be able to put food on table and maybe use the surplus to send their kids to school without earning money per se. Similarly, slum dwellers might seem to have higher income levels because survival in urban areas demand use of currency but they might still be likely to experience extreme deprivations such as lack of food.

Another interesting finding in the report is where the poor live. Of the 1.6 billion "multidimensionally poor" people, 52% live in South Asia, followed by 29 percent in Sub-Saharan Africa. India is home to most destitute people - 343.5 million of them, or 28.5 percent of the population. But Niger tops the list of countries with highest percentage of the poor: 68.8 percent of its population is destitute.

Is this a definitive number of people in poverty? It is hard to tell. So take it with another grain of salt too.