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Jakarta Post

An alternative poverty measurement

Progress in poverty alleviation was one of the topics of President Joko “Jokowi” Widodo’s speech during celebrations for the 70th anniversary of Indonesia’s independence last month

Anna Rahmawaty (The Jakarta Post)
Jakarta
Wed, September 2, 2015

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An alternative poverty measurement

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rogress in poverty alleviation was one of the topics of President Joko '€œJokowi'€ Widodo'€™s speech during celebrations for the 70th anniversary of Indonesia'€™s independence last month.

Over the past five years, the poverty rate has declined (in absolute terms) by about 2 percentage points. The rate of reduction, however, is getting slower each year.

To measure the poverty rate, up until now, the government is using a poverty line '€” comparing household consumption against the poverty line, or monetary poverty measurement. A household with consumption expenses lower than the poverty line is considered poor, and vice versa.

But the financial poverty measurement does not perfectly capture whether or not a household is poor. For example, it is no secret that households in Yogyakarta have low consumption expenditure because they tend to consume tempeh all the time. However, if this measurement is supplemented with performance in other sectors, they may not be considered poor. On the aggregate, people in Yogyakarta have relatively better education and health than other regions.

Financial poverty measurement is a good indicator of wellbeing. Yet, financial poverty alone does show a whole picture. The government should be more innovative and think outside of the box. Multidimensional poverty analysis shows improvement by sector, and can be disaggregated by subgroups or regions.
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A poverty alleviation program through cash transfer is unlikely to reduce numbers of poor people.

First, a multidimensional measurement can be designed with a number of sectors, for instance education, health, access to basic services and standards of living. In short, the government has a tool to evaluate poverty reduction in reference to selected important sectors in line with policies.

A multidimensional measurement can show the sectors in which the poor are deprived. A multidimensional measurement captures which is the most chronic sector in terms of poverty.

As the budget is limited, government alleviation policies must be focused on the most severe sector, meaning that more resources should be allocated to a key sector that is significantly affected by poverty.

It is important to have good and more complete information to design poverty elimination policy. From a multidimensional poverty measurement, it is possible to trace which sectors perform very poorly during a particular period of time. For example, there is a possibility that access to improved toilets is the most adverse condition in an area. This kind of information is unlikely to be measured by financial poverty.

Second, a multidimensional poverty measurement can be disaggregated by region or subgroup. It means that the government is able to apply better targeting to alleviate poverty. The poverty rate in Indonesia is relatively low compared to a decade ago. But a number of people in a particular region are trapped in chronic poverty. Some groups of people stay poor. The government must design and implement poverty elimination policies for the right groups of people.

A poverty alleviation program through cash transfer is unlikely to effectively reduce numbers of poor people. It is important to recognize chronically poor people and target poverty reduction policies specifically to them.

Finally, the UN'€™s Millennium Development Goals (MDGs) are about to end by the end of 2015. To continue the good work, there is a plan to launch and implement a post-2015 development agenda, including the Sustainable Development Goals (SDGs).

Poverty is beyond the financial dimension alone. A multidimensional poverty measurement is useful to analyze achievements in sustainable development, particularly poverty eradication.

Monetary measurement combined with a multidimensional poverty measurement shows a better picture of the poverty. It is the time to consider applying both measurements side by side. Both measurements together would lead to a better policy formulation to eliminate poverty and achieve higher wellbeing for all.

As Nobel laureate Amartya Sen said, '€œdevelopment requires the removal of major sources of unfreedom: poverty as well as tyranny, poor economic opportunities as well as systematic social deprivation'€.
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The writer holds a Master of Arts in policy economics from Williams College, the US, and works at the National Development Planning Ministry (Bappenas). The views expressed are her own.

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