Pacific Statistics Methods Board Meeting on Poverty Measurement

10thmeeting of the Pacific Statistics Methods Board 17-18 October 2022 Naumi Auckland Airport Hotel Auckland, New Zealand Jean-Paul ZOYEM (SPC consultant Welfare Economist)

PSMB interest to Poverty Measurement PSMB Advises the PICTs to properly monitor the UN Sustainable Development Goal target SDG1.2: By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions Monetary poverty indicators used to report on the SDG1.2.1: Proportion of population living below the national poverty line, by sex and age Multidimensional poverty indicators used to report on the SDG 1.2.2: Proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions

Poverty measurement: 2 parts 1. Monetary Poverty measurement: Review of the Guidance note Endorsement of the Guidance note 2. Multidimensional Poverty measurement: Previous discussions of the board Open discussions on the way to proceed for future recommendations

Monetary Poverty measurement: the PSMB meetings 1. October 2018 Board meeting: Board requested the poverty working group to recommend a course of action for poverty measurement, 2. October 2019 Board meeting: Kristen Himelein (World Bank) presented the rationale for poverty measurement and a detailed explanation of methodologies for its calculation Detailed issues that arise in measuring each component in Pacific contexts and suggested ways of addressing them; Proposed a draft of recommendations to PSMB for monetary poverty measurement; listed issues for further investigations

Monetary Poverty measurement: the PSMB meetings 3. July 2020 Board meeting: The poverty working group presented an annotated agenda on poverty measurement guidelines with comments from three peer reviewers (David Abbott, Gaurav Datt and Giovanni Vecchi) The Board adopted the guidelines as interim measures, noting that the guidelines will be tested through analyses on HIES in Vanuatu, Kiribati and Marshall Island 4. September 2020 Board virtual meeting: The presentation was deferred: the Chair was intended to (a) provide reassurance to Government Statisticians on poverty measurement issues, and (b) resolve the issues left for further discussion by PSMB s meeting in July 2020

Monetary Poverty measurement: Recommendations 1. Two monetary poverty lines The international poverty line (SDG1.1.1) should use the USD 1.90 PPP per capita per day (calculated by the World Bank) for comparison among countries; The national poverty line (SDG1.2.1) should be measured using the cost-of-basic-needs (CBN) approach based; On national survey data which takes into account the living conditions in an individual country or region, And on a basket of the food that poor people actually consume.

Monetary Poverty measurement: Recommendations 2. Food consumption should include purchases, gifts received, food provided in- kind, own production, meals prepared and consumed away from home (purchased or received in-kind) and rations (such as after a natural disaster).. 3. Non-food consumption should include the use value of assets, imputed rent, education spending, health spending on preventative and elective procedures, but exclude lumpy expenditures, investment, loans, interest, taxes, and transfers out of the household (including gifts, remittances, and religious contributions). 4. Imputed rent should be calculated using the proposed decision path to account for local price differences and compensate for owners tendencies to overvalue their dwelling.

Monetary Poverty measurement: Recommendations 5. Countries should continue to use the OECD per adult equivalent instead of per capita measures to adjust the consumption aggregate for household composition. That means assigning value of 1 to the first household member, 0.7 to each additional adult, and 0.5 to each child. 6. The reference population for the consumption basket should exclude the top and bottom deciles as appropriate if there are outliers, and otherwise use an iterative approach to determine the correct part of the distribution.

Monetary Poverty measurement: Recommendations 7. Poverty analysis should use the FGT measures, including poverty headcount, poverty gap, and poverty severity. 8. All data cleaning and calculations should be done using replicable methods in a statistical analysis program such as Stata or R. The do / R studio files should be retained and archived along with the dataset

Monetary Poverty measurement: some key issues Questions submitted to the 2ndround of recommendations 1. How should own production of food be priced? Unit values? Market survey? Other? 2. When estimating the calories consumed away from home, should a multiplier be used? If so, how should the value be determined? 3. Should urgent care health spending be included in the non-food consumption aggregate? 4. Should the household composition adjustment take into account partakers? 5. Should there be a regional caloric requirement? How should that value be set? 6. What method should be used for calculating the non-food component of the poverty line? 7. How should the poverty line be adjusted over time?

Recommendations on interim status (PSMB meeting on July 2020 ) 1. How should own production of food be priced? Unit values? Market survey? Other? (area of agreement) Base the pricing on the best available source of data . When pricing is based on unit prices it is advised to use the median unit values from the lowest area of geographic disaggregation at which stable estimates can be calculated. It is suggested to set a minimum number of observations and to include quality checks. 2. When estimating the calories consumed away from home, should a multiplier be used? If so, how should the value be determined? (area for further discussion) Adopt a multiplier of 1.25. Additional work will help to revise the multiplier

Recommendations on interim status (PSMB meeting on July 2020 ) 3. Should urgent care health spending be included in the non-food consumption aggregate? (area for further discussion) Breaking health spending into three categories: preventative and elective, urgent care, and catastrophic spending. Catastrophic spending will be excluded. The questionnaire design will therefore need to distinguish between preventative and elective care, urgent care, and catastrophic spending. 4. Should the household composition adjustment take into account partakers? (area for further discussion) Adjusting the per adult equivalent measure to account for partakers is a relatively new recommendation coming from the survey literature. Was addressed in the World Bank presentation on October 2019; but did not benefit from further discussions

Recommendations on interim status (PSMB meeting on July 2020) 5. Should there be a regional caloric requirement? How should that value be set? (area of agreement) Base the dietary energy requirements on a normative threshold value (defined as providing the estimated minimum calorie intake consistent with an economically active and healthy life for the average person in the population) from WHO/FAO 2011 Human Energy Requirements and the most recently available population pyramid information. For the Pacific the World Bank calculations of daily calorie requirements give a best estimate of between 2300 and 2400 kcal (** source to be checked **).

Recommendations on interim status (PSMB meeting on July 2020 ) 6. What method should be used for calculating the non-food component of the poverty line? (area for further discussion) Compute the non-food component of the poverty line by calculating both the upper and lower bound and deciding which is most appropriate. This method is flexible and addresses concerns related to small sample sizes and relatively low poverty rates in PICTs.

Recommendations on interim status (PSMB meeting on July 2020 ) 7. How should the poverty line be adjusted over time? (area of agreement) Poverty lines should be updated using the CPI in successive rounds up to the point at which they become obsolete. The line should therefore be updated every 5 10 years or when there has been a significant shift in the economic environment. It is suggested to update food and non-food components separately, provided appropriate, good-quality CPI measures are available.

Monetary Poverty measurement: the Guidance Note The Guidance note was built on discussions at the PSMB meetings For use by NSOs It is a live document to be updated: With formal approval of the Board, Based on new developments on good practices of poverty measurement, Based on the assessment of the HIES poverty analyses following this guidance note

Monetary Poverty measurement, Guidance Note Endorsement of the Guidance note

Monetary Poverty Measurement: Guidance Note Thank you for your attention