Poverty affects 1.6 billion people worldwide but not many people know how to measure and prevent it. If we define Poverty as a state of being extremely Poor then the second question arises what is to be extremely poor? Is it about money or different deprivations that matter for the poor. It is statistically known by World Bank how many are “income poor”, people who are living under a 1.90$ a day. Moreover, people who are income poor are also people who are malnourished. Income poor are not accurate measure for poverty, because income is volatile concept and it does not simply take into consideration long-term deprivations. On the other hand, there is Multidimensional Poverty Index (MPI) which is based on deprivations that are observable.
The MPI includes incidence of poverty – the proportion of the population that is multidimensional poor – and the average intensity of their deprivation – the average proportion of indicators in which they are deprived. The MPI is just a multiplication of these two values. The MPI uses 10 indicators to measure poverty in three dimensions: education, health and living standard. They are not including the deprivation of non-poor people while computing the index. This means that index observes only poor people. This is very advantageous because proxy for poverty will take into account long term deprivations.
To make comparative analysis, I have selected 15 post-soviet countries (transition economies). They are as follows; Albania, Armenia, Azerbaijan, Belarus, Estonia, Georgia, Croatia, Kazakhstan, Kyrgyzstan, Macedonia, Russian Federation, Serbia, Slovakia, Turkmenistan and Ukraine. Figure 1 shows that Estonia has the highest MPI among all other countries. As we already mentioned above, MPI is just a multiplication of incidence poverty (Estonia has 7.2%, the highest among selected countries, see Figure 2) and intensity of deprivation (Average 36.5% of deprivations). This altogether causes MPI to be higher than country such as Azerbaijan (GNI per capita_ 6,560$ in 2015), Kazakhstan (GNI per capita_ 11,390$ in 2015) and etc. (Estonia’s GNI per capita_ 18,360$ in 2015).
Figure 1. Multidimensional Poverty Index of selected countries in 2015
The Oxford Poverty and Human Development Initiative (OPHI) uses three dimensions: education, health and living standard to measure incidence of deprivations in poverty. Let's analyze one indicator from each dimensions:
Figure 2. Headcount ratio of selected countries in 2015
The Oxford Poverty and Human Development Initiative (OPHI) uses three dimensions: education, health and living standard to measure incidence of deprivations in poverty. Let's analyze one indicator from each dimensions:
- From education: schooling (Figure 3). Surprisingly, proportion of people who are poor and deprived in schooling is the highest in Estonia (7.2% of poor population). For me, as an alumni of Estonia this fact was unexpected, because human capital is really valued there. For not having subjective opinion, I checked human development indices and PISA scores by countries. Estonia appears in the ranking at top position. So, this turns out to be objective opinion. Most importantly, E-stonia such a tiny country is the most tech-savvy in the world today. This is impossible to achieve without good education. Deprivation of schooling (7.2%) is only in poor population, which means that dimension of education is only a proxy for poor households not for whole population. This is really accurate measurement because in order to eradicate extreme poverty (below poverty line 1.90$ a day) government’s target group should be poor households.
Figure 3. Deprivation in schooling of poor households
- From living standard: cooking fuel (Figure 4). Around 2.4% of poor population who are already under poverty line use bad cooking fuel, not healthy one in Estonia (this proportion is the highest among selected countries). It might be used twice or more times while food preparation. Especially this is harmful for children and young people, who need good nutrition to lead healthy lifestyle and have high life expectancy which is so important for economy development.
Figure 4. Deprivation in cooking fuel
- From health: child mortality (Figure 5). In this dimension Azerbaijan takes the highest rank, 3.4% of poor population deprive in child mortality. Estonia has the bottom position, 0% of poor population indicates that there is no deprivation in child mortality. Moreover, second indicator of health dimension, deprivation in nutrition is 0.2% of poor people in Estonia. This altogether clearly shows that health condition among poor people is very good in Estonia.
Figure 5. Deprivation in child mortality
Estonia has a long road ahead. 1 in 10 is unemployed. Every fifth Estonian lives in poverty. 2003 year's survey is the most recent one for estimating MPI in Estonia (in 2011 OPHI published first MPI results for Estonia). Summing up, if we consider all figures mentioned above then Estonia has high risk of becoming multidimensionally poor country. Despite its success, Estonia needs other policies to run, those policies should be targeted on the poor households. Yes, it is good to become E-stonia, but multidimensional poverty remains an ongoing issue.
