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Inequality and Poverty Puzzles | M Zafar Khan Safdar

In Pakistan, household consumption is used as a welfare indicator. Poverty lines are the thresholds that separate the poor from the non-poor

The main goal of economic development is improving the economic well being of a community through efforts that entail job creation, job retention, tax base enhancements and improving quality of life. As there is no single definition for economic development, there is no single strategy, policy or programme for achieving successful economic development. Communities differ in their geographic and political strengths and weaknesses. Each community, therefore, will have a unique set of challenges for economic development.

The study of inequality from the economic perspective cannot be analysed as a single topic or even as a phenomenon to be approached from a generalised theoretical view when trying to understand the correct way to be interpreted, measured or even defined. Regardless of the etymological origin, which basically denotes the absence of equality, the understanding of this term can be generally related to a negative connotation for the distribution of whatever assignation of interest to a defined group of recipient units (commonly individuals, households, countries or any other combination of units that can be defined as identifiable entities). This negative connotation is commonly associated to considerations of justice, seeing the referred absence as a sign of unfairness; in other words, tacitly elevating the concept of equality to the rank of a positive ethical value.

In order to be a subject of analysis, the absence referred to by the etymological definition of inequality must necessarily be associated to another measurable element, which is normally the unit we will measure and try to objectively evaluate in relation to other distributions of the same elements, the most common examples being income, wealth and consumption, as well as other normative elements such as welfare and utility. In this way, the objective of any study on inequality must invariably be focused precisely on the chosen element of reference, as inequality (as a topic) represents only the value judgment of the absence of a homogeneous distribution of such element. In this context, for example, the study of gender, race, opportunities or income inequality are the chosen elements (the ones to measure and compare), and their distribution is the condition we will evaluate in relation to our judgment on its goodness or badness.

Official poverty estimates have shown that poverty declined from 34.4 percent in 2000-2001 to 22.3 percent in 2005-2006 and, subsequently, from 22.3 percent in 2005-2006 to around 12.4 percent in 2010-2011, with 7.1 percent in urban areas and 15.1 percent in rural areas. The declining trend in poverty as seen in Pakistan during the 1970s and 1980s was reversed in the 1990s by poor federal policies and rampant corruption. This phenomenon has been referred to as the poverty bomb.

In Pakistan, household consumption is used as a welfare indicator. Poverty lines are the thresholds that separate the poor from the non-poor. The ministry of planning, development and reform measures poverty on the consumption-based approach using data from the Household Integrated Economic Survey (HIES). The official poverty line in Pakistan is calorie-based and consumption-based absolute poverty is estimated after converting the household consumption level to the adult equivalent based on the recommended nutritional requirements of 2,350 calories per person per day and providing an almost equivalent amount for other basic needs.

Using HIES’ 1998-1999 data, the planning commission estimated the absolute poverty line as being Rs 673.50 per month per adult equivalent. The commission has adjusted the poverty line for the 2000-2001, 2004-2005 and 2005-2006 periods using the Consumer Price Index (CPI). In 2004-2005, the official poverty line was Rs 878.64 per month per adult and in 2005-2006 the inflation adjusted official poverty line was Rs 944.5 per month per adult equivalent. The adjusted official poverty line for 2007-2008 was Rs 1,140 per month per adult equivalent. More recently, the Planning Commission adjusted the official poverty line for 2010-2011 at Rs 1,745 per month per adult equivalent.

Recently, the Oxford Poverty and Human Development Initiative (OPHI) developed the Multidimensional Poverty Index (MPI) to reflect the multiple deprivations that a poor person faces with respect to education, health and living standards. The government of Pakistan in collaboration with the United Nations Development Project (UNDP) is trying to develop an MPI for Pakistan.

The present government of the PML-N has developed a comprehensive poverty reduction strategy, which is primarily built upon nine pillars such as macroeconomic stability and real sector growth, protecting the poor and the vulnerable, increasing productivity and value addition in agriculture, integrated energy development programmes, making industry internationally competitive, human development for the 21st century, removing infrastructure bottlenecks through public private partnerships, capital and finance for development, and governance for a just and fair system.

There have been many programmes run by governments in succession like rural development programmes, land reforms, social welfare programmes, social securities, Pakistan’s bait-ul-maal, the Benazir Income Support Programme and much more. Some of them were continued only for a specific period while others have been refined and further strengthened and are being continued. Some have been replaced with the new one. However, these programmes, to some extent, helped people skip out of the poverty web through multi-dimensional approaches. By involving multiple graduation strategies, resilience against various shocks and long-term planning for human capital development was built.

It is a proven fact that the nature of poverty in Pakistan is mostly transient, which means that the poor reflect a trend of going above and below the poverty line at times. Poverty can be fought only through a special package of policy measures designed to accelerate growth both in the agricultural and industrial sectors, launch new employment generation programmes and ensure a more equitable distribution of national income. Effective and monitored steps by the government are required to help reduce poverty and increase income generation.

The writer is a PhD scholar working for the federal government and is based in Islamabad. He can be reached at zafarkhansafdar@yahoo.com

Source: http://www.dailytimes.com.pk/opinion/28-Nov-2015/inequality-and-poverty-puzzles

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