Multidimensional poverty

November 29, 2005

Free Market Foundation

Generally, researchers have relied on a single indicator of poverty: income. However, there is now a significant and growing literature advocating the use of multidimensional measures, says Chris Sarlo of the Fraser Institute.

This new literature suggests that poverty in developed nations is relative and manifests itself in a variety of ways both monetary and non-monetary and that something fundamental is missed by limiting the measurement of poverty, says Sarlo:

Proponents argue that low levels of education or poor health are not necessarily related to low income but may still be manifestations of deprivation.

Deficiencies in these areas point to “capabilities” deprivations, which are, in their view, a part of being poor.

Other dimensions of poverty typically include environmental quality, subjective poverty (people who find it difficult to make ends meet or who are unable to afford the cost of a one week vacation away from home once a year), social participation deprivation (they can’t afford to invite people over for dinner) and risk of poverty indicators such as unemployment, single parenthood and disability.

Since, the literature is largely theoretical with only a limited number of empirical studies, there are some concerns surrounding the approach:

There is a clear “relativistic bias,” which means that most supporters also believe that poverty is a relative condition in which people are poor if they fall markedly behind most others in their society.

However, a more pressing concern is the loss of transparency, since multidimensional measures might not be clear to everyone; this could lead to confusion and a loss of commitment to help.

But, a better sense of the current state of poverty could still be achieved by using multidimensional measures, rather than a single one, says Sarlo.

Source: Chris Sarlo, Multidimensional Poverty, Fraser Forum, October 2005, Fraser Institute.

For text: http://www.fraserinstitute.ca/admin/books/chapterfiles/Oct05ffSarlo.pdf#

For more on Economy: http://www.ncpa.org/iss/eco/

FMF Policy Bulletin/ 22 November 2005