How Poor is
Poor?
July
21, 2006
The
Economic Survey of Pakistan released last month
stated that there has been a massive plunge in
poverty over the last five years. Poverty rate
has declined from 34% to 24% of the population,
and the absolute number of the poor has dropped
from about 50 million to about 40 million people.
But this leads to an obvious question: what is
poverty, and if the rest of Pakistanis are not
in it, then where are they?
Defining poverty is in fact a very difficult task.
Should it be a relative standard only? Can we
just say that the bottom 10% are in poverty in
every society? Or should there be objective standards?
And what would make sense in all countries?
In the United States, the Federal government has
a poverty definition that relies on objective
standards. For a family of four, poverty is present
if the household income is less than 20,000 dollars
annually. But 20,000 dollars annually would be
enough to live like a king in most Third World
countries, including Pakistan. Using the US government
standard, the poverty rate in Pakistan would probably
be above 85%.
Pakistan, and most Third World countries, along
with the World Bank, uses an objective, but very
low standard of poverty. This is the income required
to obtain 2350 calories per day of food. In Pakistan,
that amounts to an income of 10,000 rupees per
person annually. This is not much at all, and
comes to about 160 dollars per person at market
exchange rates.
Clearly, just the fact that you are not in poverty
in Pakistan hardly implies an acceptable standard
of living. The Pakistani government in its surveys
of the population should collect more complete
data so that we can get a better picture of the
society.
I would suggest that we divide Pakistani society
into five different economic classes. Those in
deep poverty meet the current definition of poverty,
and have insufficient income to even afford an
adequate diet. They live very difficult and hard
lives, and have high rates of infant mortality
and illiteracy.
I would then delineate a group just above poverty;
let’s call them the poor. The poor are those
who have adequate food resources, but are living
lives of significant limitation. They do not own
their own home, or if they do it is a one- or
two-room hovel, they are unable to afford education
for all their children, they lack the resources
to seek medical help when needed, and they have
little or no wealth saved. They also lack discretionary
income for modern appliances such as air conditioners
or motorcycles or for entertainment such as movies
or concerts. Some of this group do however obtain
cell phones as their first major purchase.
The next group, the lower middle-class, has the
resources to afford basic education, healthcare
access, clean water, and discretionary spending
money to buy gadgets and appliances. Some can
afford to own a home, even if modest. They cannot
afford expensive luxuries, although they enjoy
recreational and entertainment opportunities within
Pakistan. They aspire to own at least a motorcycle
in the family.
The fourth group, the upper middle-class, has
lives that are similar to Western standards of
living. They can afford university for their children,
medical specialist care, own a Pakistani-made
small car, and can occasionally travel abroad
to England or the Middle East. They often have
both an adequate income, and some savings of note.
The final group are the rich. They have very abundant
lives with multiple properties, servants, fancy
foreign travel, and expensive imported automobiles.
They live in large houses and can send their children
to study in Europe or America and pay the cost
themselves.
It would be very interesting to see how the Pakistani
population breaks down along these lines. Based
on soaring sales of cars, motorbikes, cell phones,
and air conditioners, it is clear that the ranks
of the upper and lower middle classes are expanding
rapidly.
While the rich make up no more than 1% of Pakistan’s
population (perhaps 300,000 families at most),
the middle classes are now reaching 25% of the
population. While the poverty-stricken are declining,
many of those are merely rising into the ranks
of the poor. To become a developed society, this
huge bulk of the population must be pushed all
the way into the upper middle-class. This can
be achieved, but not overnight. It will take another
20-25 years of 7% annual GDP growth to get there.
Given that when Pakistan was born 59 years ago,
there was no middle class at all, it is remarkable
that we are now less than 25 years from such a
great achievement. Comments can reach me at Nali@socal.rr.com
