ADB report proposes broader definition of poverty

The Asian Development Bank has released a report, produced under the responsibility of its new chief economist, which takes issue with using the World Bank’s US$1.25 a day definition of the extreme poverty threshold for estimating the number of poor in Asia and the Pacific and for designing policy responses.

The report puts forward a broadened definition of poverty taking account of three factors:
– Calculating a basic “Asian” extreme poverty threshold using the same criteria as those for the WB’s $1.25 threshold – which was calculated on the basis of data from the 15 poorest countries globally, only two of which are Asian – and instead using data from the nine lowest-income countries in Asia-Pacific. The Asian extreme poverty level would be $1.51.
– An adjustment for food insecurity in light of the fact that prices of food, which comprises a larger share than average of expenditures for low-income people, have increased faster than the general consumer price index.
– An adjustment for vulnerability, accounting for the fact that people close to but above the poverty line are at much higher risk than others of falling below it when they are victims of natural disaster, job loss, illness, etc.

The broadened definition of poverty suggested in the ADB report would result in increasing the extreme poverty rate in developing Asia-Pacific from 20.7 per cent using the $1.25 a day criterion to 49.5 per cent using the revised definition. These rates are for 2010. The report concludes as follows:

“Fast growth has made Asia a role model in reducing extreme poverty—measured by the conventional $1.25 poverty line. However, that fast growth has been accompanied by rising food insecurity and vulnerability. Exploring these lead to the conclusion that poverty will remain a serious challenge for Asia including those already in the middle-income stage—well beyond 2030. To confront this challenge, in addition to promoting growth, Asia must enhance food security and reduce vulnerability. This requires resources, assistance and appropriate policies targeted at the poor by national governments, development agents, and donors from Asia and beyond.”
(http://www.adb.org/sites/default/files/pub/2014/ki2014-special-chapter.pdf)

The report is included as a 50-page special chapter in the ADB’s “Key Indicators for Asia and the Pacific 2014”, available here in full (350 pages) in English only:
http://www.adb.org/sites/default/files/pub/2014/ki2014.pdf

An ADB press release on the new poverty report is available in English, Bahasa Indonesia, Chinese and Japanese:
http://www.adb.org/news/broader-view-poverty-underscores-critical-long-term-challenge-adb