GOAL 1: NO POVERTY

Percentage of the population struggling to survive on less than PPP U$1.90 a day at 2011 international prices.

The proportion of the employed population below PPP US$1.90 per day, also referred to as the working poverty rate, is defined as the share of employed persons living in households with per-capita consumption or income that is below the line of PPP US$1.90.

Employment: All persons of working age who, during a short reference period (one week), were engaged in any activity to produce goods or provide services for pay or profit.

Poverty Line: Threshold below which individuals in the reference population are considered poor and above which they are considered non-poor. The threshold is generally defined as the per-capita monetary requirements an individual needs to afford the purchase of a basic bundle of goods and services.

Household in poverty: Households are defined as poor if their income or consumption expenditure is below the poverty line considering the number of household members and composition (e.g., number of adults and children).

Working poor: Employed persons living in households that are classified as poor, that is, that have income or consumption levels below the poverty line used for measurement.

Purchasing power parities (PPP): Conversion factor, private consumption, is the number of units of a country’s currency required to buy the same amount of goods and services in the domestic market as a U.S. dollar would buy in the United States. This conversion factor is applicable to private consumption. Statistically, PPPs are expenditure-weighted averages of relative prices of a vast number of goods and services on which people spend their incomes and like all statistics there is a margin of error around the estimates.

The original “$1-a-day” line was based on a compilation of national lines for only 22 developing countries, mostly from academic studies in the 1980s. In 2009, based on a new compilation of national poverty it was updated to PPP U$1.25 a day (as an average of poverty lines for the poorest 15 countries of the 75 available at the time). The current extreme poverty line is set at $1.90 a day in 2011 PPP terms, which represents the mean of the national poverty lines found in the same poorest 15 countries ranked by per capita consumption.

When measuring international poverty of a country, the international poverty line at PPP is converted to local currencies in 2011 price and is then converted to the prices prevailing at the time of the relevant household survey using the best available Consumer Price Index (CPI). (Equivalently, the survey data on household consumption or income for the survey year are expressed in the prices of the ICP base year, and then converted to PPP dollars.) Then the poverty rate is calculated from that survey. All inter-temporal comparisons are real, as assessed using the country-specific CPI. Interpolation/extrapolation methods are used to line up the survey-based estimates with these reference years.

Working poverty rate = (Employed persons living on less than PPPUS$ 1.90 a day/Total employment) x 100

At the country level, comparisons over time may be affected by such factors as changes in survey types or data collection methods. The use of PPPs rather than market exchange rates attempts to taken into account differences in price levels across countries. However, it cannot be categorically asserted that two people in two different countries, living below US$1.90 a day at PPP, face the same degree of deprivation or have the same degree of need.

Poverty in the context of this indicator is a concept that is applied to households, and not to individuals, based on the assumption that households pool their income. This assumption may not always be true. This assumption is particularly important for children. This indicator cannot measure “monetary child poverty” but it can measure children in monetary poor households.

Moreover, the poverty status of a household is a function of the wage and other employment-related income secured by those household members in employment, income derived from asset ownership, plus any other available income such as transfer payments as well as the number of household members. Whether a worker is counted as working poor therefore depends on his or her own income, the income of other household members and the number of household members who need to be supported. It is thus often valuable to study household structure in relation to working poverty.

Despite progress in the last decade, the challenges of measuring poverty remain. The timeliness, frequency, quality and comparability of household surveys needs to increase substantially, particularly in the poorest countries. The availability and quality of poverty monitoring data remains low in small states, countries with fragile situations, and low-income countries and even some middle-income countries. The low frequency and lack of comparability of the data available in some countries create uncertainty over the magnitude of poverty reduction.

Besides the frequency and timeliness of survey data, other data quality issues arise in measuring household living standards. The surveys ask detailed questions on sources of income and how it was spent, which must be carefully recorded by trained personnel. Income is generally more difficult to measure accurately, and consumption comes closer to the notion of living standards. And income can vary over time even if living standards do not. But consumption data are not always available: the latest estimates reported here use consumption data for about two-thirds of countries.

However, even similar surveys may not be strictly comparable because of differences in timing or in the quality and training of enumerators. Comparisons of countries at different levels of development also pose a potential problem because of differences in the relative importance of the consumption of nonmarket goods. The local market value of all consumption in kind (including own production, particularly important in underdeveloped rural economies) should be included in total consumption expenditure but may not be. Most survey data now include valuations for consumption or income from own production, but valuation methods vary.

The construction of PPP also faces challenges. It is harder to measure than market-based rates. As calculating PPPs is a huge undertaking, new price comparisons are available only at infrequent intervals. Moreover, the PPP calculation excludes many countries.

The extreme poverty rate, a “headcount” measure, is one of the most commonly calculated measures of poverty. Yet it has the drawback that it does not capture income inequality among the poor or the depth of poverty. For instance, it fails to account for the fact that some people may be living just below the poverty line, while others experience far greater shortfalls. Policymakers seeking to make the largest possible impact on the headcount measure might be tempted to direct their poverty alleviation resources to those closest to the poverty line (and therefore least poor).

Lastly, these income/consumption-based poverty indicators do not fully reflect the other dimensions of poverty such as inequality, vulnerability and lack of voice and power of the poor.

The national poverty rate is the percentage of the total population living below the national poverty line.

In assessing poverty in a given country, and how best to reduce poverty according to national definitions, one naturally focuses on a poverty line that is considered appropriate for that country. Within a country, the cost of living is typically higher in urban areas than in rural areas. Some countries may have separate urban and rural poverty lines to represent different cost of living (to attain the same minimum standard or to accommodate different needs such as not needing mosquito nets in high altitudes but requiring heating which may not be needed in tropical areas).

Poverty Line: Threshold below which individuals in the reference population are considered poor and above which they are considered non-poor. The threshold is generally defined as the per-capita monetary requirements an individual needs to afford the purchase of a basic bundle of goods and services.

Household in poverty: Households are defined as poor if their income or consumption expenditure is below the poverty line taking into account the number of household members and composition (e.g., number of adults and children).

The formula for calculating the proportion of the total population living below the national poverty line, or headcount index, counts and adds up all the persons with income or consumption below the poverty line. This group is presented as a percentage of the total population.

Consumption or income data are gathered from nationally representative household surveys, which contain detailed responses to questions regarding spending habits and sources of income.

Consumption, including consumption from own production, or income is calculated for the entire household. In some cases, an “effective” household size is calculated from the actual household size to reflect assumed efficiencies in consumption; adjustments may also be made to reflect the number of children in a household. The number of people in those households is aggregated to estimate the number of poor persons.

National poverty rates use a country specific poverty line, reflecting the country’s economic and social circumstances. In some case, the national poverty line is adjusted for different areas (such as urban and rural) within a country, to account for differences in prices or the availability of goods and services. Typically the urban poverty line is set higher than the rural poverty line; reflecting the relatively higher costs of living in urban areas and different needs to live in different geographic areas.

Consumption is the preferred welfare indicator for several reasons. Income is generally more difficult to measure accurately. For example, the poor who work in the informal sector may not receive or report monetary wages; self-employed workers often experience irregular income flows; and many people in rural areas depend on idiosyncratic, agricultural incomes.

Consumption is measured by using household survey questions on food and nonfood expenditures as well as food consumed from the household’s own production, which is particularly important in the poorest developing countries. This information is collected either through recall questions using lists of consumption items or through diaries in which respondents record all expenditures daily. But these methods do not always provide equivalent information, and depending on the approach used, consumption can be underestimated or overestimated. Different surveys use different recall or reference periods. Depending on the true flow of expenditures, the rate of spending reported is sensitive to the length of the reporting period. The longer the reference period, the more likely respondents will fail to recall certain expenses—especially food items—thus resulting in underestimation of true expenditure.

Best-practice surveys administer detailed lists of specific consumption items. These individual items collected through the questionnaires are aggregated afterward. But many surveys use questionnaires in which respondents are asked to report expenditures for broad categories of goods. In other words, specific consumption items are implicitly aggregated by virtue of the questionnaire design. This shortens the interview, reducing the cost of the survey. A shorter questionnaire is also thought to reduce the likelihood of fatigue for both respondents and interviewers, which can lead to reporting errors. However, there is also evidence that less detailed coverage of specific items in the questionnaire can lead to underestimation of actual household consumption. The reuse of questionnaires may cause new consumption goods to be omitted, leading to further underreporting.

Invariably some sampled households do not participate in surveys because they refuse to do so or because nobody is at home. This is often referred to as “unit nonresponse” and is distinct from “item nonresponse,” which occurs when some of the sampled respondents participate but refuse to answer certain questions, such as those pertaining to consumption or income. To the extent that survey nonresponse is random, there is no concern regarding biases in survey-based inferences; the sample will still be representative of the population. However, households with different incomes are not equally likely to respond. Relatively rich households may be less likely to participate because of the high opportunity cost of their time or because of concerns about intrusion in their affairs. It is conceivable that the poorest can likewise be underrepresented; some are homeless and hard to reach in standard household survey designs, and some may be physically or socially isolated and thus less easily interviewed. If nonresponse systematically increases with income, surveys will tend to overestimate poverty. But if compliance tends to be lower for both the very poor and the very rich, there will be potentially offsetting effects on the measured incidence of poverty.

Even if survey data were entirely accurate and comprehensive, the measure of poverty obtained could still fail to capture important aspects of individual welfare. For example, using household consumption measures ignores potential inequalities within households. Thus, consumption- or income-based poverty measures are informative but should not be interpreted as a sufficient statistic for assessing the quality of people’s lives. The difficulties in measuring intra-household inequality and poverty differentials means there are limitations in using this metric to assess individual child poverty. The best information that the disaggregation of the indicator provides is the proportion of children living in poor households, only an indirect measure to assess children’s poverty and well-being.

The following series can be used to monitor the SDG 1.2.2.:

-Proportion of households (headcount) which are multidimensionally poor

-Proportion of persons (headcount) who are multidimensionally poor (these could be estimated directly for each individual or extracted from the household estimates)

-Average number or percentage of deprivations in which poor people are deprived

-Proportion of children who are deprived in multiple dimensions (which are rights constitutive of poverty)

-Average number of deprivations suffered by children (these could be estimated out of all children or just poor ones)

Indicators: Variables (singly or combined) used to assess deprivation in each dimension

Dimensions: conceptual categories which comprise poverty if there is deprivation in one or more of them

Thresholds of deprivation: Minima to be achieved in each dimension to consider the child, person or household attains an adequate level of satisfaction within that domain

Cut-off: minimum number of deprivations to be considered poor (could be one)

Rights constitutive of poverty: Rights that directly and fundamentally require consumption of (public or private resources) for their continued realization; each one is a dimension of child poverty

The methodology to estimate multidimensional poverty consists of two steps:

1) Identification consists of finding out who (a child, a household or a person) is deprived in each dimension (i.e. their indicators for that dimension fall below the minimum threshold to avoid deprivation).

2) Aggregation across dimensions entails counting those who are considered poor (i.e. everyone who suffers a deprivation if the cut-off is one, or those who suffer at least two deprivations if the cut-off is two, etc.).

Within this methodology, there are many ways to choose indicators and dimensions to select thresholds and cut-offs and to aggregate across dimensions.

The compiled data of SDG 1.2.2 are not intended to be comparable across countries due to the diverse dimensions, indicators and thresholds, used in different countries. Also, cut-offs to determine poverty vary across countries.

There are two indicators listed to monitor this target. One is based on household surveys. The other one is based on an administrative survey. Both aim to capture effective coverage.

1. The one based on administrative surveys reflects the proportion of persons effectively covered by a social protection system, including social protection floors. It also reflects the main components of social protection: child and maternity benefits, support for persons without a job, persons with disabilities, victims of work injuries and older persons.
Effective coverage of social protection is measured by the number of people who are either actively contributing to a social insurance scheme or receiving benefits (contributory or non-contributory).

2. The one based on household surveys reflects coverage of social protection and labor programmes by measuring the percentage of population participating in social insurance, social safety nets, unemployment benefits, and active labor market programmes. Estimates include both direct and indirect beneficiaries.

Social protection systems include contributory and non-contributory schemes for children, pregnant women with newborns, people in active age, older persons, for victims of work injuries and persons with disabilities. Social protection floors provide at least a basic level in all main contingencies along the life cycle, as defined in the Social Protection Floors Recommendation 2012 (no. 202) referred to in SDG 1.3.

When assessing coverage and gaps in coverage based on administrative surveys, distinctions need to be made between coverage by:

1. Contributory social insurance;
2. Universal schemes covering all residents (or all residents in a given category) and
3. Means-tested schemes potentially covering all those who pass the required test of income and/or assets

The indicator based on household surveys is estimated by programme type, for the entire population and by quintiles of both the post- and pre-transfer welfare distribution. Programmes are aggregated into social assistance, social insurance and labor market. Indicators provide the totals summing up the social assistance, social insurance and labor market figures.

Calculations include separate indicators in order to distinguish between effective coverage for children, unemployed persons, older persons and persons with disabilities, mothers with newborns, workers protected in case of work injury, and the poor and marginalized, when using administrative surveys. For each case, coverage is expressed as a share of the respective population.

Data are collected through an administrative survey ongoing for decades, the ILO Social Security Inquiry. Whenever countries provide data, the indicator is disaggregated by sex. Indicators for effective coverage are obtained as follows:

1. Proportion of children covered by social protection benefits: ratio of children/households receiving child or family cash benefits to the total number of children/households with children

2. Proportion of women giving birth covered by maternity benefits: ratio of women receiving cash maternity benefits to women giving birth in the same year (estimated based on age-specific fertility rates published in the UN’s World Population Prospects or on the number of live births corrected for the share of twin and triplet births)

3. Proportion of persons with disabilities receiving benefits: ratio of persons receiving disability cash benefits to persons with severe disabilities. The latter is calculated as the product of prevalence of disability ratios (published for each country group by the World Health Organization) and each country’s population

4. Proportion of unemployed receiving benefits: ratio of recipients of unemployment cash benefits to the number of unemployed persons

5. Proportion of workers covered in case of employment injury: ratio of workers protected by injury insurance to total employment or the labour force

6. Proportion of older persons receiving a pension: ratio of persons above statutory retirement age receiving an old-age pension to persons above statutory retirement age (including contributory and non-contributory)

7. Proportion of persons who may need benefits receiving them: ratio of social assistance recipients to the total number of persons who might need them. The latter are calculated by subtracting from total population all people of working age who are contributing to a social insurance scheme or receiving contributory benefits, and all persons above retirement age receiving contributory benefits

The aggregate indicator is calculated as the proportion of the total population receiving cash benefits under at least one of the contingencies (contributory or non-contributory benefit) or actively contributing to at least one social security scheme.

Coverage based on data calculated from national representative household surveys are collected in The Atlas of Social Protection – Indicators of Resilience and Equity (ASPIRE) by the World Bank. These indicators refer to the ‘effective’ coverage definition, measuring the direct and indirect beneficiaries who are actually receiving social protection benefits at the time nationally representative household survey data are collected, as within a target group (total population, for different income quintiles, total population in urban and rural areas).

Generally, these indicators are based on a first level analysis of original household survey data (with no imputations) and on a unified methodology that does not necessarily reflect country-specific knowledge and in-depth country analysis relying on different data sources (administrative programme level data).

It is important to note that the extent to which information on specific transfers and programmes is captured in the household surveys can vary a lot across countries. Often household surveys do not capture the universe of social protection and labor programmes in the country, in best practice cases just the largest programmes. Many household surveys have limited information on these programmes, some surveys collect information only on participation without including the transfer amounts; and others include programme information mixed with private transfers, making it difficult to isolate individual SPL programmes.

Therefore, information based on household surveys is limited to what is captured by them and does not necessarily represent the universe of programmes existing in the country. In addition, the availability of these indicators depends on the type of questions included in the survey. If transfer amounts are available, for example, adequacy and impact on poverty indicators can be generated. If only programme participation questions are included in the survey, only non- monetary indicators can be generated such as coverage or beneficiary incidence. As a consequence, performance indicators are not fully comparable across harmonized programme categories and countries. Moreover, these indicators do not include (in the current edition) those who are protected by law, or those who have benefits guaranteed but are not necessarily receiving them at the time the survey is administered – for example people who actively contribute to old-age pensions and are entitled to the benefits on reaching retirement age.

However, household surveys have the unique advantages of allowing analysis of programme impact on household welfare. With such caveats in mind, indicators based on household surveys provide an approximate measure of social protection systems performance.

Click on the button below to explore the data behind this indicator.

Explore the data

Proportion of government spending on health and education and direct transfers which directly benefit those living in monetary poverty.

Government spending measures public expenditures on health and education services. Direct transfers refer to cash transfers and near-cash transfers. The definition of the monetary poor follows national standards, with poverty levels determined by national definition of income or consumption poverty (consistent with SDG Indicator 1.2.1).

Proportion of public spending: Expenditures by governments on health, education and direct transfers (cash transfers and near-cash transfers).

Monetary poverty: determined by national definition of income/consumption poverty (consistent with SDG Indicator 1.2.1).

The indicator can be estimated for any country for which: (a) A micro-dataset exists, detailing incomes or expenditures and services utilization (i.e. education, health, and cash transfers receipts) at the individual or household level and (b) A set of fiscal, administrative, or budgetary records detailing public expenditures at the programme level is available.

Monetary poverty can be derived directly from a nationally representative micro-dataset (an Income and Expenditure Survey, for example). Procedures for estimations are detailed comprehensively in the SDG Indicator 1.2.1 metadata.

Public spending on social services can be directly derived from budget administrative data.

A fiscal incidence analysis is required to estimate the benefit the poor individuals or households (depending on underlying survey data) are receiving from those services. The incidence analysis measures the monetised value of in-kind transfers in education and health services at average government costs. In addition, this indicator includes cash and near-cash transfers in the definition of social services (conditional and unconditional cash transfers, school feeding programmes, etc.). These procedures have been used internationally for over 40 years.

The indicator could be compared with the one under SDG Indicator 10.4.1 on equity of fiscal policy. Countries should be encouraged to collect and analyse the data within a single process to create synergy and avoid unnecessary duplication.

The indicator does not take into effect the consequences of revenue-related fiscal activities, such as taxes or contributions to public insurance systems, on the poor.