Module 10: Social Policy and Poverty

Module details Name

Subject Name Social Work Education
Principle Investigator Prof S Parasuraman and Prof Manish Jha
Paper Name Social Policy
Module Module 10: Social Policy and Poverty
Paper Coordinator Dr. Sohini Sengupta
Content Writer Dr. Sohini Sengupta and Ms. Vidya Viswanathan
Content Reviewer Prof Madhushree Sekher
Keywords Social policy, poverty, poverty reduction
This module will help the student to learn about:
1. Various conceptual theories of Poverty
2. Various methodical ways of poverty measurement and
Learning Objectives
its efficacy as a practice
3. The role of social policy and its relevance as a means
of poverty reduction
Introduction

Poverty has been defined as a state or condition of deprivation of various economic, political
and social resources. It has been a long debated issue, with many definitions and conceptual
understanding under various school of thoughts. But what is it actually, what is the
benchmark which draws a line between a poor and non-poor. And how valid is this
benchmarking process to help the deprived and destitute to come out of the state of poverty,
are some questions which we will try to answer through this module. At the end of this
module, the reader will be able to understand:

• Various conceptual theories of Poverty

• Various methodical ways of poverty measurement and its efficacy as a practice
• The role of social policy and its relevance as a means of poverty reduction

What is Poverty?

Poverty has been defined as a state or condition of deprivation from the basic needs of life.
According to World Bank, poverty can be defined as;

“Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and not being able to see
a doctor. Poverty is not having access to school and not knowing how to read. Poverty is not
having a job, is fear for the future, living one day at a time.

Poverty has many faces, changing from place to place and across time, and has been
described in many ways. Most often, poverty is a situation people want to escape. So poverty
is a call to action -- for the poor and the wealthy alike -- a call to change the world so that
many more may have enough to eat, adequate shelter, access to education and health,
protection from violence, and a voice in what happens in their communities.”

According to Sen, being poor means that you are at an income level which falls short to meet
certain basic necessities of life in the society. Poverty is a multi-dimensional and a complex
issue which cannot be measured in a straight-jacket method. One has to understand the social
and economic context of the people to evaluate the extent of poverty incidence amongst
them.(Sen, 1983) Poverty can be described under two main heads i.e. absolute poverty and
relative poverty. Seebhom Rowntree defines absolute poverty as ‘the condition under which
one cannot afford the minimum provision required to maintain healthy and working
efficiency”. His methodology to measure poverty was based on the nutritional intake of a
person from his/her diet. It is also known as Subsistence Poverty.
The prime criticism of absolute poverty gave birth to the concept of relative poverty.
Absolute poverty was criticised for its assumption that there is one single minimum level of
needs for people living across the world in various societies. Hence, the socially-contextual
relative difference in the deprivation levels of people across various societies came to be
known as relative poverty. Relative Poverty can be measured by understanding the minimum
levels of requirement to lead a reasonable standard of living as per the conventions of the
society. This concept captures those deprivation levels which excludes a person from the
ordinary living patterns and active participation in the society.

In order to understand the complexity of poverty one needs to empirically measure and
analyse it to formulate social policies around it. Poverty estimates or calculations are central
to any government’s planning and policy department to decide upon the scale of policies to
be introduced. Across the world, a shift to targeted approach from the universal welfare
schemes, forms a fundamental factor guiding the eligibility criteria. Hence in order to
understand who is poor and who is not poor, one needs to establish a benchmark which will
separate the two. This can only be done if one formulates a way to measure poverty with
empirical evidences.

Ways to Measure Poverty:

Measuring poverty or defining who is poor has a long history extending back to Poor Laws in
England. Each country has been devising ways to measure the incidence of poverty and
identify the poor in their respective societies. There have been various ways and methods to
develop an approach for poverty calculation to use the results for designing anti-poverty
policy interventions.

Ashwani Saith in his article ‘Poverty Lines versus the Poor’ explains six basic approaches
and also highlights the methodology shortcomings for each one of them.

• In the first approach, a basic needs basket is designed on the basis of minimum levels
of intake/ consumption required for the survival of human being. This biological
approach are guided by level defined on scientific grounds.
• Second approach, this includes the viewpoint of the community and society in order
to define the basic levels of requirement to lead a socially acceptable standard of
living and associated ways of being. This approach is not necessarily mandated by the
poor in any society.
 • The third approach is called inductive empiricist, here the level is taken from the
observed consumer behaviour. This includes commodities at a low price elasticity of
demand and an income elasticity of demand near unity, falling with the rising income.
• Fourth approach will rely on the people to define the concept of poverty through their
lived experiences. Hence the difference between the poor and the non-poor is based
on the self-perception of the people concerned.
• Fifth approach is based on politico-administrative tactic, where the poverty line is
defined on the basis of its political implication and its strain on the budget of the state.
• Sixth and the most popular approach depends on the universal line set for poverty
such as 1$/ day case. It is used to find the number of people falling below this
universal benchmark line. (SAITH, 2005)

These measurements of poverty incidence using income of nutritional intake has two flaws.
First, is the assumptions used during the methodical procedure for calculating these poverty
lines such as content of the food baskets, inter-regional differences in diets as well as prices,
income distribution data of various regions and states. Hence the need is to sensitise the
poverty line for these regional variations in consumption and choices. Second, is the
meaningfulness of the poverty line, it must reflect the actual deprivation levels of the people
concerned and should not be calculated in a reductionist manner in order to control the
incidence of poverty.

Issues with Measurement

Energy Expenditure: The caloric intake measurement is based on the standard calories
requirement for a sedentary lifestyle, hence the average calorie intake to decide poverty lines
falls between 2100 calories in urban areas and 2400 calories in rural areas. This calorie
calculation falls short given the average poor in both rural and urban areas are often involved
in extreme laborious work to earn a living. Hence poverty lines pegged at these calorie intake
will not help us in understanding the depth of poverty and will push a lot of poor people
above the poverty line.

Cheap Calories: The calories calculation to estimate the poverty line is based on the cheapest
resources for calories available. This means that it is assumed that the poor should seek the
cheapest basket to meet the calorie requirement than what they themselves would prefer.
Hence in such cases, the poor who choose not to consume the cheapest basket for calorie
requirement will end up consuming less calories than the stipulated figure of calorie intake
determining poverty line.

Non-Food basics: The calculations for the basic food consumption can be done on scientific
grounds. However, how can one calculate the minimum consumption levels of non-food
basic items? There are various methods adopted by the authorities to calculate the minimum
requirement for the non-food basics, such as adopting identifying the units if non-food basics
required and measure its value at market price or arbitrarily setting 50% of the consumption
on non-food needs. The biggest issues with these methods is the fact that while food items are
calculated on the scientific grounds the non-food basics are not need-based. Hence, what
levels are adequate and why, are few questions which will never have a definite answer.

Secondly, the frequent variation in the market price of non-food items cannot be captured in
the poverty measurement methodology. E.g. in China access to health and education is
decreasing while on papers, the authorities boasts of falling income-poverty. This clearly
shows the variance between the poverty measurement methodology and the accessibility to
non-food basics such as education and health, in China.

Public Provisioning: Most of the methods fail to capture the accessibility to non-food basics
for a household. Public provisioning of education and health is available in developing
countries but its access is not uniform. Also, the methodology doesn’t capture the change in
the model of provisioning from universal provisioning to subsidise provisioning, which leads
to decline in accessibility. This essentially creates gap in our poverty analysis.

Household Asset Base: The poverty line calculation is strictly based on the income levels. It
ignores the asset ownership of households while evaluation their income levels. Similarly, for
households which are under debts, the poverty analysis is conducted solely on the basis of
income. This oversight of asset and liabilities of a household will push a lot of poor people
above poverty line and non-poor people below the poverty line.

Intra-household Disparities: While taking household as a unit for measurement, we ignore

the intra-household disparities which exists. Hence the well-being levels of a household
reflects the well-being of women, children and elders living in household. This might not be
the cases where there is gender inequality in a households or neglect towards an elderly in a
household.
Marginalisation and Exclusion: The measurement techniques overlooks the extent of spatial
exclusion and identity-based marginalization faced by certain households in any region. The
poverty measurement ignores the socio-political dynamics in any region which breeds and
deepens the poverty levels for few.

Inequality: Measuring poverty without including the parameter of inequality gives us a partial
understanding of poverty incidences. Absolute poverty cannot be understood completely
without considering inequality in it. Since inequality and resource accessibility is closely
related, it is necessary to understand inequality while measuring poverty in any region.

While above are the fundamental issues faced with the contemporary ways to measure
poverty incidence across the world. In India, the poverty line assessments have seen a similar
trend where economist and policy makes have been struggling to find that one perfect way to
get a realistic picture of poverty and its extent in India.

Case Study: India

In 1979, it was Planning Commission which defined poverty line at expenditure on per capita
calorie intake of around 2400 calories in rural areas and 2100 calories at urban areas. It was
based on consumption basket of 1973-74 National Sample Survey (NSS) observations which
pegged the poverty lines based on the given calorie intakes, at Rs. 49.09 per capita per month
in rural areas and Rs. 56.64 per capita per month in urban areas. These prices were updated
every year on the basis of consumer price indices. Hence in 2004-05 the poverty line was
updated to Rs. 356.30 per capita per month in rural areas and Rs. 538.60 per capita per month
in urban areas. At these lines, almost 28.7% people in rural areas and 25.9% people in urban
areas were below the poverty line. (Rath, 2011)

Since these lines were abysmally low, there was a growing need to revisit this poverty
measurement methodology. In addition, these poverty lines were calculated on the
assumption that the consumption basket of 1973-74 remains unchanged. Hence a committee
was formed under Dr. Suresh Tendulkar, to revisit the poverty lines. The Tendulkar
Committee revamped the poverty lines by de-linking it from the calorie-norms and using all-
India poverty line as the basis to calculate all the other poverty lines in the country. The new
poverty lines were re-estimated using 2004-05 figures, to be Rs. 446.68 in rural areas and Rs.
578.8 in urban areas (per capita per month). These upward revisions in the poverty lines
pushed a lot of people below the poverty line, exhibiting the extent of poverty in our country.
Currently, the poverty lines in India is Rs 32 in rural areas and Rs. 47 in urban areas per day,
as per the Rangarajan panel.(Ramakumar, 2010)

So far even in India, poverty measurement has not been able to bring out the actual extent of
poverty. The figures provided as per the committee gives us a partial understanding of the
poverty and the deprivations faced by the poor people.

Analysing Poverty through Poverty Lines

In the defence of the poverty lines, many would argue that poverty lines meets the most
fundamental requirement of identifying the poorest of the poor. However, the assumption that
it targets the poorest of poor is also flawed. Given that these poverty lines are determined by
the private consumption expenditure incurred by an individual per household, highlights
drawbacks in this approach. The expenditure doesn’t measure the income sources of the
households such as a normal household spending on basic necessities will be at the same
level with a household which has taken a debt to spend on basic needs. In this case, the
factors such as interest on debt or any collateral charges goes unaccounted, which misleads
the outcome of poverty estimation. Secondly, the status of poor households is very volatile,
some households which are just above the poverty line can slip below because of one serious
illness in the family. Hence in such cases annual calculation of the actual poorest of the poor,
will be a herculean task. Also, the fact that one figure or a line could define if you are
suffering from destitution or not could be statistically a sound approach but socially it is
discriminatory.

Lastly, it is a one-dimensional approach which ignores the multi-dimensional angles of

deprivation in our society. Such a narrow approach fills gap into the widely understood
concept of deprivation and destitution. And this flawed understanding of poverty and
deprivation often leads to inadequate policy interventions, leaving a lot of needy households
without any state provision to get out of their destitution.

Social Policy and Poverty Reduction

Measuring poverty and identifying poor households essentially help the State in
understanding the extent of poverty and deciding relevant policy interventions to address the
same. The social policies aims at promoting social development and equity to enable people
come out of destitution in a sustainable way. These policies also provide a safety net for those
who are vulnerable to vagaries of labour market or social crises such as old-age and sickness.
Enforcing such policies leads to strengthening of democracy through a social contract of
rights and duties between a State and its citizens.

Social policies are implemented through three different types of social protection
instruments:

1. Social Insurance
2. Social Assistance
3. Labour Market Policies

Social insurances refer to employment-based programmes which runs on the contribution of

both employers and employees. Social Assistance refers to those transfers for those who are
excluded from getting a gainful employment. This also includes public employment
interventions to provide safety net of basic income for people who are unemployed. Social
assistance are financed through taxes or through grants or aids. Lastly, Labour market
policies uphold basic labour rights and working conditions.

In developing countries, social assistance programs are considered to be an ideal instrument

to directly reduce poverty. Such programs are more effective in building up the consumption
levels of the people. Also, in such countries it is difficult to work with labour market policies
owing to vagaries such as informalisation and unemployment in the labour market. In
developed countries, social assistance is employed when all other instruments such as social
insurance and labour market policies fail, targeting a small portion of people suffering from
poverty. One of the popular social assistance instruments employed in the developing
countries are Conditional Cash Transfers (CCTs), which combines income transfers and
investment in human capital e.g. Mahatma Gandhi National Rural Employment Guarantee
Scheme (MGNREGS), which aims at providing people with work during lean seasons and to
stop distress migration. This schemes mainly aims people who are structurally or social
vulnerable and suffer from shocks and crises in labour market.

While employing these social policy instruments policy makers always have to make a choice
between universalistic or targeted approach. Both the approaches has its own pros and cons,
however policy makers are often inclined towards targeted since universalism puts a resource
pressure on authorities and is also criticised for resource capture by the affluent. Owing to
which, the most marginalised communities remain excluded because of discrimination and
vulnerabilities. E.g. earlier the PDS system was universal in India due to which the poorest
people used to get excluded while the affluent used to enjoy the highly subsidised daily
staples and hoard it for black market.

Hence, targeted social policy instruments becomes a rational choice where resources are
limited. Even conditional cash transfers are targeted towards households which meets the
eligibility, such below poverty line or women headed households and alike. These targeted
means of social policy instruments are useful to provide a safety cushion to the most
vulnerable and help them come out of destitution by strengthening their consumption and
human capital. E.g. child education grants, old age pensions and MGNREGS.

In more advanced economies, labour market policies pave a way out for sustainable
development of human capabilities. These policies makes the labour market less
discriminatory and more productive while enhancing the capabilities people involved in it.
While Social assistance helps people in getting out of poverty, labour market policies works
towards making a just labour market which helps people stay above poverty and become
resilient towards vulnerabilities. E.g. policies such as equal wages, social security schemes
for labourers or decent working conditions are few of the policies which safeguards the
interest of the working class. It aims at building the agency and capacities of people to resist
the shocks and crisis.However the changing labour market landscape has been adversely
impacting these labour policies. Recent phenomenon’s such as globalization, liberalization
has opened the floodgates and rendered the labour exposed and vulnerable to global
vagariesof the market such informalisation, urbanisation, competition and feminisation of
labour.

Financing Social Policies for Poverty Reduction

While understanding the social policies aimed at reducing poverty, one must also understand
the various ways to finance these social policies. Most of the countries finance their social
policies through internal sources such as taxation or social insurance schemes, and external
sources such as aids and grants. Internationals aids and grants along with taxation policies are
the major sources through which the countries finance their social policies.

The economic conditions of the country also contributes to the design of social policies in the
country. During a financial crisis in a country, social protection helps in mitigating the
negative impacts of the crisis on income and consumption levels of the people. Conditional
Cash Transfers have been used as useful tool to provide a safety net for its people. However,
in few cases such financial crisis often mean extra strain on the public budget and major cut
down on the social expenditure to maintain fiscal prudence. This leads to proclivity towards
means-tested benefits and more contributory social protection programmes in place. Also, the
current labour market trends have created a dire need for more social assistance programmes,
to offset the negative impacts of informalisation, unemployment and lack of job security.
This puts more pressure on the State budgets to provide for social protection and further leads
to targeted policies. Hence States are in constant need for more support in terms of
contribution towards their social policies and social protection programmes. The
governments constantly adopt innovative methods to increase the contribution through
taxation e.g. encouraging informal sector companies to register and become formal with
incentives such as funding and subsidy or raise the tax slabs to extract taxes from the top
layer of the pyramid which if often met with criticism from the wealthy.

Concluding Remarks

The anti-dote of poverty and its reduction strategies are deeply rooted in the social policy and
social protection programmes. Social policies are not only useful to mitigate the impacts of
poverty but also to revisit the structure of development which are in some ways leading to
these shocks and crisis in our society. Various agencies have been deciphering the code of
poverty to design interventions which will address the reasons causing poverty and
vulnerability.

Such social policies and programs aimed at poverty reduction have to be deeply rooted in the
values of human rights and social justice. Strategies such as universalism ensure few
vulnerable groups don’t fall through the cracks of social fragmentation of in the society.
Secondly these policies and programs should not be entirely on charity-based approach rather
these should promote livelihood enhancing growth pathways for the people, it should also
promote democratically just and cohesive societies. Lastly agency-building has to be the
mainstay of all the social policies designed to alleviate poverty as poverty may seem to be a
transitory problem but in majority of cases it’s a chronic problem which requires a
sustainable solution which is people-centric. (Katja Hujo, 2011)