Social Policy and Poverty

Deprivation of numerous economic, political, and social resources has been described as a state or condition of poverty. It has been a hotly contested topic for a long time, with numerous conceptual interpretations and definitions falling under different schools of thought. However, what exactly constitutes a poor person as opposed to a non-poor person? We will attempt to provide answers to some of these problems through this module, including the validity of the benchmarking process in assisting the poor and needy in escaping poverty. Readers will be able to comprehend the following after finishing this blog:

Various conceptual explanations of poverty;
Various methodical approaches to measuring poverty and their applicability;
The function of social policy and its applicability as a strategy for reducing poverty

Content

What is Poverty?
Ways to Measure Poverty
Issues with Measurement
Case Study: India
Analysing Poverty through Poverty Lines
Social Policy and Poverty Reduction
Financing Social Policies for Poverty Reductions
Conclusion

What is Poverty?

As a state or condition of being deprived of one's basic needs, poverty has been defined.

The World Bank states that poverty is defined as "hunger. Absence of shelter is poverty. Being sick and unable to visit a doctor is poverty. Being illiterate and lacking access to education are both aspects of poverty. Living day by day and not having a job are all signs of poverty.

Poverty has been characterised in a variety of ways and takes on various forms that vary from place to place and over time. Most of the time, people want to get out of poverty. Therefore, poverty is a call to action for both the wealthy and the poor, a call to change the world so that more people may have access to food, shelter, education, and healthcare, as well as protection from violence and a voice in local affairs. Sen defines poverty as having an income below what is required to meet some societally accepted minimum standards of living. Being multifaceted and complex, poverty cannot be assessed using a one-size-fits-all approach. To assess the level of poverty among the population, one must comprehend their social and economic environment. (Sen, 1983)

Absolute and relative poverty are the two main categories used to describe poverty. Absolute poverty, according to Seebhom Rowntree, is "the condition where one cannot afford the minimal provision necessary to maintain healthy and working efficiency." His method of calculating poverty was based on how much food an individual consumed in a day. Subsistence poverty is another name for it.

The main criticism of absolute poverty is where the idea of relative poverty originated.

Absolute poverty has drawn criticism for assuming that people living in different societies around the world have the same minimum set of needs. Relative poverty is the term for the socially contextual relative variation in the levels of deprivation among individuals across various societies. Understanding the minimal standards of living necessary to maintain a reasonable standard of living in accordance with social norms allows one to calculate relative poverty.

This idea encompasses the degrees of deprivation that keep a person from engaging in normal daily activities and contributing to society. One needs to empirically measure and analyse poverty in order to formulate social policies that will address its complexity. Any government's planning and policy department uses estimates or calculations of poverty to determine the scope of the policies that should be implemented. The transition from universal welfare programmes to targeted approaches is a key element influencing eligibility requirements globally. Therefore, one needs to establish a benchmark that will distinguish between the two in order to understand who is poor and who is not. This can only be accomplished if a method of measuring poverty based on empirical data is developed.

Ways to Measure Poverty

Since the time of the English Poor Laws, measuring poverty and identifying those who are poor have a long history. Every nation has developed methods for calculating the prevalence of poverty and identifying the poor in their respective societies. There are many different approaches and techniques for developing a method for calculating poverty and using the results to create anti-poverty policy interventions.

In his article "Poverty Lines versus the Poor," Ashwani Saith outlines six fundamental approaches and identifies each one's methodological flaws.

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)

There are two problems with these estimations of the prevalence of poverty using nutritional intake and income.

The assumptions made during the methodical process for calculating these poverty lines include the contents of food baskets, regional variations in diets and prices, and information on the distribution of income across different regions and states. Therefore, it is necessary to make the poverty line more aware of these regional differences in consumption and options. The second factor is the poverty line's relevance; in order to reduce the incidence of poverty, it should accurately reflect the degree of deprivation experienced by the individuals in question.

Issues with Measurement

Energy Expenditure: Because the caloric intake measurement is based on the typical number of calories needed for a sedentary lifestyle, the average calorie intake used to determine poverty lines is between 2100 and 2400 calories depending on where you live. Given that the typical poor in both rural and urban areas frequently engage in extremely arduous work to make a living, this calorie calculation is insufficient. Therefore, setting the poverty line at these calorie intakes will not help us understand the depth of poverty and will cause many poor people to rise above it.

Low-cost Calories: The calculation of calories used to determine the poverty line is based on the least expensive calorie sources available. This implies that, rather than choosing what they would personally prefer, the poor should look for the cheapest basket to satisfy their calorie needs.

Therefore, in such circumstances, the poor who decide against consuming the cheapest basket to meet their calorie needs will end up consuming fewer calories than the required amount to meet the poverty line.

Non-Food Basics: Scientific methods can be used to calculate the basic food consumption. How can the minimum consumption levels of non-food essentials be determined, though? The authorities use a variety of methods to determine the minimum amount needed for non-food necessities, such as identifying the units needed and valuing them at market rates or arbitrary allocation of 50% of consumption to non-food requirements. The biggest problem with these methods is that while food items are based on scientific calculations, the necessities other than food are not. Therefore, there are some questions that will never have a clear solution, such as what levels are appropriate and why.

Second, the methodology for measuring poverty cannot account for the regular fluctuations in the market price of non-food items. E.g. in China access to health and education is decreasing while on papers, the authorities boasts of falling income-poverty. This demonstrates the disparity between the methods used to measure poverty and the availability of non-food necessities like health and education in China.

Public Provisioning: The majority of methods fall short of capturing a household's access to non-food necessities. In developing nations, public health and education are provided, but access to these services varies. Additionally, the methodology fails to account for the shift from a model of provisioning that provides for universal access to one that provides for subsidised access, which results in a decline in accessibility. This essentially leaves a gap in our analysis of poverty.

Household Asset Base: The calculation of the poverty line is solely based on income levels. When assessing households' income levels, it disregards their asset ownership. Similar to this, the poverty analysis is only done on the basis of income for households that have debt. Many poor people will be forced above the poverty line by this oversight of a household's assets and liabilities, while non-poor people will be forced below it.

Intra-household Disparities: When using a household as a unit of measurement, we disregard any intra-household disparities that may exist. Therefore, the levels of well-being in a household reflect the well-being of the women, kids, and elders who reside there. It's possible that this doesn't apply to households where there is elder abuse or gender inequality.

Exclusion and Marginalization: The measurement methods ignore the degree of geographical exclusion and identity-based marginalisation that some households in any region experience. The socio-political dynamics in any region, which breed and deepen poverty levels for some, are ignored in the measurement of poverty.

Inequality: Measuring poverty without taking into account the factor of inequality only allows us to have a partial understanding of the incidences of poverty. Absolute poverty cannot be fully understood without taking inequality into account. Understanding inequality is essential when assessing poverty in any area because it is closely related to resource accessibility.

While the aforementioned are the fundamental problems with the modern methods for calculating the prevalence of poverty around the world. Similar trends have been observed in India's poverty line assessments, where economists and policymakers have been searching for the ideal method to accurately depict poverty and its scope in India.

Case Study: India

The Planning Commission established the poverty line in 1979 at 2100 calories in urban areas and about 2400 calories in rural areas, respectively. The poverty thresholds were set at Rs. 49.09 per person per month in rural areas and Rs. 56.64 per person per month in urban areas based on consumption basket data from the 1973–74 National Sample Survey (NSS). Based on consumer price indices, these prices were updated annually. The poverty line was therefore updated in 2004–05 to Rs. 356.30 per capita per month in rural areas and Rs. 538.60 per capita per month in urban areas. Nearly 28.7% of people in rural areas and 25.9% of people in urban areas lived below the poverty line at these lines. (Rath, 2011)

There was a growing need to review this poverty measurement methodology because these lines were so appallingly low. Additionally, it was assumed that the consumption basket from 1973–1974 would remain unchanged when calculating these poverty lines. So, a committee headed by Dr. Suresh Tendulkar was established to review the poverty lines. The Tendulkar Committee redesigned the poverty thresholds by removing the connection to calorie norms and using the all-India threshold as the starting point for calculating all other poverty thresholds across the nation. Using data from 2004–2005, the new poverty lines were re-estimated to be Rs. 446.68 in rural areas and Rs. 578.8 in urban areas (per capita per month). Many people were pushed below the poverty line by these increases in the poverty thresholds, illustrating the severity of poverty in our nation.

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)

The true extent of poverty has not yet been revealed by poverty measurement, not even in India. We can only partially understand the poverty and hardships that the poor people experience from the statistics provided by the committee.

Analysing Poverty through Poverty Lines

Many people would argue that the poverty lines satisfy the most basic requirement of identifying the poorest of the poor. However, it is incorrect to assume that it only benefits the poorest of the poor. The fact that these poverty levels are based on the private consumption expenditures made by a person per household exposes weaknesses in this strategy. A normal household spending on basic needs will be at the same level as a household that has taken on debt to spend on basic needs because the expenditure does not measure the income sources of the households. In this instance, factors like debt interest or any collateral charges are not taken into account, which skews the results of the poverty estimation. A serious illness in the family can cause a household that is just above the poverty line to fall below it, which is another reason why the status of poor households is so unstable. Therefore, it will be a herculean task to determine who the actual poorest of the poor are each year in such cases. Additionally, while using a single number or line to determine whether someone is in need or not may be a sound statistical strategy, it is discriminatory on a social level.

Finally, it is a one-dimensional strategy that disregards the various facets of social deprivation. Such a limited perspective bridges the gap between the well-known concepts of deprivation and destitution. And this incorrect perception of poverty and deprivation frequently results in ineffective policy interventions, leaving many needy households without any state assistance to escape their poverty.

Social Policy and Poverty Reduction

The State can better understand the scope of poverty and choose appropriate policy interventions to address it by measuring poverty and identifying poor households. To help people escape poverty in a long-term manner, social policies aim to promote social development and equity. Additionally, these policies offer a safety net for those who are susceptible to the whims of the job market or societal crises like old age and illness.

By upholding a social contract of rights and obligations between a State and its citizens, such policies strengthen democracy.

There are three different types of social protection instruments used to implement social policies.

Social Insurance
Social Assistance
Labour Market Policies

Social insurances are employment-based programmes that are supported by both employers' and employees' contributions. The term "social assistance" refers to payments made to people who cannot find gainful employment. This also includes public employment initiatives that offer unemployed people a safety net of basic income. Taxes, grants, and other financial aid are used to pay for social assistance. Finally, policies governing the labour market uphold fundamental labour rights and working conditions.

Social assistance programmes are viewed as the best tool for reducing poverty in developing nations. Such initiatives are more successful at raising peoples' consumption levels. Additionally, because of unforeseen circumstances like informalization and unemployment in the labour market, it is challenging to work with labour market policies in these nations. Social assistance, which focuses on a small subset of the poor, is used in developed nations when other tools like social insurance and labour market policies fail. Conditional Cash Transfers (CCTs), which combine income transfers and investments in human capital like the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which aims to give people work during hard times and prevent distress migration, are one of the popular social assistance tools used in developing countries. This programme primarily targets those who are socially or structurally at risk and experience job market shocks and crises.

Policymakers must always decide between a universalistic and a targeted approach when using these social policy tools. Both strategies have advantages and disadvantages, but policymakers are frequently leaning toward targeted strategies because universalism puts pressure on government resources and is also criticised for allowing the wealthy to syphon off resources. Because of this, the most vulnerable communities continue to be excluded due to prejudice. For instance, when India's PDS system first became widespread, the poorest citizens were left out, while the wealthy were able to enjoy the heavily discounted daily necessities and store them away for the black market.

As a result, in situations where resources are scarce, targeted social policy instruments become the sensible option. Even conditional cash transfers are directed at households that qualify, such as those that fall below the poverty line or have women as the head of household, among others. By boosting their consumption and human capital, these targeted social policy instruments are helpful in giving a safety net to the most vulnerable and assisting them in escaping poverty. For instance, old age pensions, child education grants, and MGNREGS. Policies governing the labour market in more developed economies open doors for the long-term enhancement of human potential. These policies improve the capabilities of those who work in the labour market while making it less discriminatory and more productive.

While social assistance helps people escape poverty, labour market policies work to create a just labour market that enables people to maintain their standard of living and build resilience against vulnerabilities. For instance, policies like equal pay, worker social security programmes, or decent working conditions are just a few of the policies that protect the interests of the working class. It aims to increase people's agency and capacity to withstand shocks and crises. These labour policies, however, have been negatively impacted by the evolving nature of the labour market. Recent developments like globalisation and liberalisation have opened the floodgates and left labour exposed to the whims of the market on a global scale, including informalization, urbanisation, competition, and feminization of labour.

Financing Social Policies for Poverty Reduction

Understanding the various ways to finance these social policies is necessary in addition to comprehending the social policies themselves that are intended to reduce poverty. Most nations use a combination of internal funding mechanisms, like taxes or social insurance plans, and external funding mechanisms, like aid and grants, to pay for their social policies. The primary means by which the nations finance their social policies are through international aid and grants, along with taxation laws.

The development of social policies in the nation is also influenced by its economic situation. Social protection assists in reducing the crisis's detrimental effects on peoples' income and consumption levels during a financial crisis in a nation. Conditional Cash Transfers have been effective in giving its citizens a safety net. To maintain fiscal responsibility, however, such financial crises occasionally result in increased pressure on the public budget and significant reductions in social spending. As a result, social protection programmes become more contributory and are more likely to be means-tested. Additionally, in order to counteract the negative effects of informalization, unemployment, and a lack of job security, there is an urgent need for more social assistance programmes.

This further encourages the development of targeted policies and increases the pressure on the state budgets to fund social protection. As a result, States constantly require more assistance in the form of financial contributions to their social policies and social protection programmes. Governments frequently employ cutting-edge strategies to raise revenue through taxation, such as encouraging unregistered businesses to register and become formal with incentives like funding and subsidies or raising tax slabs to collect taxes from the top of the pyramid, which is frequently criticised by the wealthy.

Conclusion

The social policy and social protection programmes have a strong foundation in the antidote to poverty and its reduction strategies. Social policies are helpful not only in reducing the effects of poverty, but also in revisiting the development structure that has in some ways contributed to these shocks and crises in our society. In order to create interventions that address the causes of poverty and vulnerability, numerous organisations have been cracking the code of poverty.

Such social policies and programmes for reducing poverty must be firmly based in the principles of social justice and human rights. Strategies like universalism prevent a few vulnerable groups from slipping through the social cracks in the society.

Second, these policies and programmes shouldn't solely focus on a charitable approach; rather, they should encourage people to pursue growth paths that will improve their quality of life. They should also encourage democratically just and cohesive societies. Last but not least, agency-building must be the cornerstone of all social policies aimed at reducing poverty. While poverty may appear to be a temporary issue, in most cases it is a chronic one that calls for a long-term, people-centered solution.

References

Katja Hujo, E. G. (2011). Social policy and poverty: an introduction. INTERNATIONAL Journal of Social Welfare, pp. 230-239.
Ramakumar, R. (2010). The unsettled debate on Indian poverty. Retrieved from The Hindu:http://www.thehindu.com/opinion/lead/The-unsettled-debate-on-Indian-poverty/article13763625.ece
Rath, N. (2011, October). Measurement of Poverty: In Retrospect and Prospect. Economic Political Weekly, pp. 40-43.
SAITH, A. (2005, October). Poverty Lines versus the Poor. Economic and Political Weekly, pp. 4602-4610