Disclaimer: This article is primarily intended for my students. However, others may find the content useful as well.
Poverty is defined in several ways, with each approach attempting to best capture deprivation. The simplest way to define poverty is by considering only the income- those below a specified income threshold are poor (less than $1.90 per day, for instance). This is termed ‘Absolute poverty’.
However, poverty doesn’t just mean having less money; it impacts several aspects of life- social, health, etc. Further, poverty means different things in different locations- being poor in Dubai is not the same as being poor in Mumbai. When one tries to define poverty in terms of not benefiting from facilities and services available to others, it is termed ‘Relative poverty’. The Human Poverty Index (HPI) was developed as a composite measure of relative poverty.
The Human Poverty Index (HPI) was introduced in 1997, and is a composite index which assesses three elements of deprivation in a country – longevity, knowledge and a decent standard of living.
There are two indices; the HPI – 1, which measures poverty in developing countries, and the HPI-2, which measures poverty in OCED developed economies.
HPI-1 (for developing countries)
The HPI for developing countries has three components:
- The first element is longevity, which is defined as the probability of not surviving to the age of 40.
- The second element is knowledge, which is assessed by looking at the adult literacy rate.
- The third element is to have a ‘decent’ standard of living. Failure to achieve this is identified by the percentage of the population not using an improved water source and the percentage of children under-weight for their age.
As a region of the world, Sub-Saharan Africa has the highest level of poverty as a proportion of total population, at over 60%. The second poorest region is Latin America, with 35% of its population living in poverty.
HPI-2 (for developed – OECD countries)
The indicators of deprivation are adjusted for advanced economies in the following ways:
- Longevity, which for developed countries is considered as the probability at birth of not surviving to the age of 60.
- Knowledge is assessed in terms of the percentage of adults lacking functional literacy skills, and;
- A decent standard of living is measured by the percentage of the population living below the poverty line, which is defined as those below 50% of median household disposable income, and social exclusion, which is indicated by the long-term unemployment rate.
Disadvantage of HPI:
Limited utility, because it combined average deprivation levels for each dimension and thus could not be linked to any specific group of people.
The HPI was replaced in 2010 by the Multidimensional Poverty Index or MPI – which directly measures the combination of deprivations that each household experiences. It complements traditional monetary-based poverty measures by capturing the acute deprivations that each person faces at the same time with respect to education, health and living standards.
Multidimensional Poverty Index (MPI)
The MPI assesses poverty at the individual level. If someone is deprived in a third or more of ten (weighted) indicators, the global index identifies them as ‘MPI poor’, and the extent – or intensity – of their poverty is measured by the percentage of deprivations they are experiencing.
Thus, from the figure above, the relative weights of the dimensions are: Health (1/3), Education (1/3), Standard of Living (1/3). There are two indicators each for health and education. Therefore, each indicator contributes 1/2 of 1/3 [that is, 1/2*1/3] or 1/6 of the total weight for the corresponding dimension. Standard of living has six indicators, each contributing 1/6 of 1/3 [that is, 1/6*1/3] or 1/18 of the total weight for the dimension.
The global MPI can be used to create a comprehensive picture of people living in poverty, and permits comparisons both across countries and world regions, and within countries by ethnic group, urban/rural area, subnational region, and age group, as well as other key household and community characteristics. For each group and for countries as a whole, the composition of MPI by each of the 10 indicators shows how people are poor.
Link to Human Development Report of 1997 (English) [PDF]:
Link to article describing global Multidimensional Poverty Index (MPI):
Link to 2019 global Multidimensional Poverty Index (MPI):
Link to video on 2019 global MPI: