Approaches to Measuring Urban Poverty

Approaches to Measuring Urban Poverty

Poverty is multidimensional, thus measuring it presents a number of challenges. Beyond low

income, there is low human, social and financial capital. The most common approach to measuring poverty is quantitative, money-metric measures which use income or consumption to assess whether a household can afford to purchase a basic basket of goods at a given point in time. The basket ideally reflects local tastes, and adjusts for spatial price differentials across regions and urban or rural areas in a given country.

Money-metric methods are widely used because they are objective, can be used as the basis for a range of socio-economic variables, and it is possible to adjust for differences between households, and intrahousehold inequalities.

Despite these advantages, money-metric poverty measures have some shortcomings. Survey

designs vary significantly between countries and over time, making comparability difficult. Some use income based measures, other consumption. Decisions about how to value housing, homegrown food, and how to account for household size and composition all affect poverty estimates. If not properly adjusted, monetary measures can underestimate urban poverty because they do not make allowance for the extra cost of urban living (housing, transport, and lack of opportunity to grow ones own food).

Income or consumption measures also do not capture many of the dimensions of poverty. For

example, in the urban context, the urban poor rely heavily on the cash economy thus making them more vulnerable to fluctuations in income, and there are severe environmental and health hazards due to crowded living conditions in urban slums, and no tenure security. Other aspects of poverty, both rural and urban, which are multidimensional relate to access to basic services such as water, sewage, health and education, and a safety net to mitigate hard times.

Measuring urban poverty can be carried out using a number of approaches summarized below.

Regardless of the methodology chosen, the data should ideally be comparable across cities, and allow for disaggregation at the intra-city level. This will capture vast differences between the poor in small towns and mega cities, or between urban slum areas within a given city.

Income or Consumption Measures: Both are based on data that assess whether an individual or

household can afford a basic basket of goods (typically food, housing water, clothing, transport, etc.). Consumption is generally considered to be a better measure than income because incomes tend to fluctuate over time, there are problems of under-reporting (particularly income derived from the private and informal sectors).5 Money metric measures can be adjusted to account for the higher cost of living in urban areas when measuring poverty.

Unsatisfied Basic Needs Index: This approach defines a minimum threshold for several dimensions of poverty classifying those households who do not have access to these basic needs. They include characteristics such as literacy, school attendance, piped water, sewage, adequate housing, overcrowding, and some kind of caloric and protein requirement. If a household is deficient in one of the categories, they are classified as having unsatisfied basic needs.

Asset Indicators: This has been used increasingly with the Demographic and Health Surveys (DHS), a standardized survey now administered in approximately 50 countries. A range of variables on the ownership of household assets are used to construct an indicator of households socio-economic status. These assets include: a car, refrigerator, television, dwelling characteristics (type of roof, flooring, toilet), and access to basic services including clean water and electricity.

Vulnerability: This approach defines vulnerability as a dynamic concept referring to the risk that a household or individual will experience an episode of income or health poverty over time, and the probability of being exposed to a number of other risks (violence, crime, natural disasters, being pulled out of school). Vulnerability is measured by indicators that make it possible to assess a household’s risk exposure over time through panel data. These indicators include measures of: physical assets, human capital, income diversification, links to networks, participation in the formal safety net, and access to credit markets. This kind of analysis can be quite complex, requiring a specially designed survey.

Participatory methods: This typically relies on qualitative approaches to capture aspects of urban

poverty that may not be identified through pre-coded surveys. Through tools such as focus group

discussions, case studies, and individual open-ended interviews, it is possible to determine the

perceptions of poverty, identify priority needs and concerns, and gain

e. Characteristics, Opportunity, and Constraints

What is the nature of poverty?

While income-based poverty measures provide a fair sense of which part of the

population may have unmet needs and where they are located, these measures fail to capture the

dynamic aspects of poverty, in terms of the cause and extent of deprivation, risk factors, and the

coping strategies employed. This can include analyzing vulnerability, urban-rural linkages, and

perceptions. Qualitative methods are often used for this kind of analysis.

A standard poverty profile for cities

Any profile of urban poverty would be based on a set of core information as described below.

Household surveys/census: In general this would include the following information disaggregated by income group (e.g. quintile): Location (within the city)Household size, structure


Education levels

Household expenditure patterns

Housing characteristics (tenure status, physical condition)

Access/quality/affordability to:

infrastructure (water, sewage, energy);

health care;


social services.

Administrative data: This would include data collected by various public agencies, ideally

disaggregated by geographic areas within a city.

Municipal spending by sector, location

Infrastructure (roads, public standpipes, schools, hospitals)

Health and nutritional status

Education outcomes

Crime and violence statistics

Demographic characteristics

Household size

Perception is that poor have a large household size. But this is not true since mean household size of urban poor (5.2 – according to Census of India, 1981) does not differ significantly from that of rest of urban household (5.4).

Household size and income

A research was conducted by National Institute of Urban Affairs. They take a sample of all poor households and BPL household among these poor households. They conclude that, in poorest household the larger households are not significantly poorer than the smaller households whereas in overall sample the larger households are poorer than the smaller households.

Household Consumption

In poor households, the percentage of children (< 15 years) is higher and percentage of labor force (15 -60 years) is lower. Women, children and old people are dominant in poor households.

Incidence of poverty is higher among the scheduled castes and scheduled tribes.

Poverty and Literacy levels

Illiteracy among poor is much higher than rest of urban population. A very high dropout rates from school going children. Illiteracy is particularly higher among females of low income and poor people. Girls are not encouraged to study beyond primary level.

Economic characteristics

Urban labor market is divided in formal and informal sectors and poor people are mostly employed in informal section since they don’t have the skills for employment in formal sector. Informal sectors permits easy entry, needs low skills, sometimes self employment is possible. Unemployment is very high among poor people. Even if they are employed they are paid very less and they can’t depend on their family members for income. Children are often made to work so that livelihood of the household is met. Some children are even made to work in houses such as taking care of home, looking after younger children while the parents are outside for work. Thus children who are not sent to school are used in direct or indirect way for the economic well being of household.

Most of the poor people are in informal sector and a self employed since they don’t have skills and generally they don’t have to wait for long time to get employment as they don’t have any source of income. Thus they take up some menial job which is often low paid so that they can just survive.

Work Sector

Poor people are found to work more in tertiary sector (manufacturing services, construction, transport and commerce) than in primary and secondary sector. They are employed in wide range of occupations. The hours of work, Number of days worked in a month also varies widely among the poor and it is not fixed. Longer they work more income they generate. Thus income levels greatly vary depending on occupation, work sector, number of hours, number of days of work , number of years worked in particular occupation. Underemployment, irregular job pattern and low wages are some of the critical economic problems of urban poor.

Housing and access to basic services characteristics

Housing characteristics can be divided into four types

  1. Squatters
  2. Legal occupants
  3. Tenants
  4. Owners

Squatters are very common among poor people. They usually are migrants and come to big city in search of job and since they don’t have money they occupy certain lands which are near their place of work so as to save on the transportation costs. They continue to occupy these lands despite the fear of eviction because of proximity to their work.

There are also tenants among urban poor as they can’t to build their own houses. Some of the tenants are migrants and as they have come recently into urban areas they would not be able to construct their own house. Most of the poor households live in kutcha or semi kutcha or semi pucca houses and few in pucca.

Sometimes the poor people pay bribes to officials and make their homes legal and thus claim their ownership of their house in slums. Many poor people prefer to build their own houses rather than pay rents.


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