Government's measure of poverty called into question

El Salvador's government likes to report poverty figures by comparing household income to the supposed cost of a basic consumer food basket. Under that measure, as the government reported to the United Nations, the poverty rate is measurably declining in El Salvador. But in an article published by IPS, the UN official who wrote a recent report on El Salvador's progress towards meeting the Millennium Development Goals, exposed the fallacy behind the official figures:
UNDP economist Carlos Acevedo, the author of the report, told IPS that the study took a "diplomatic" approach, reporting that poverty had declined, but also pointing out that this was a result of how the economic variables were measured.

The report, based on government data, says the proportion of households in poverty dropped from 31.5 percent in 1991 to 22.8 percent in 2005, while the proportion of households in extreme poverty shrunk from 28.2 percent to 12.3 percent.

But figures from the Economic Commission for Latin America and the Caribbean (ECLAC) reflect a very different reality. According to the regional U.N. agency’s "Social Panorama of Latin America, 2006" report, in 2004 (the last year for which statistics were available), 40.4 percent of households were below the poverty line and another 15.6 percent were extremely poor.

"What is suspicious about this national poverty line is that it reflects a gradual decline in the cost of the basic food basket, so that today it is supposedly much cheaper than 10 years ago, which is something that people don't believe," said Acevedo.

According to the official statistics, the basic basket of consumer items cost 143 dollars in 1996 for a family of four and 137 dollars in 2005, in urban areas, while it cost 110 and 88 dollars, respectively, in rural areas.

But, said Acevedo, all that has to be done is adjust the price of the consumer basket based on the evolution of food prices under the CPI to determine that its actual value is 212 and 148 dollars for urban and rural areas, respectively. (more)

In other words, if the government used the actual cost of purchasing food and basic consumer items in El Salvador, the poverty line would be much higher and so would the poverty rate. No wonder there is such a disconnect between the way the government of El Salvador portrays conditions in the country and the way life is experienced.

In a speech I recently attended, Salvadoran economist Raul Moreno suggested another way in which the ARENA government impacts the figures for extreme poverty. Through the Red Solidaria program, which provides poor families in rural areas $15 to $20 per month for children to go to school and participate in health programs, family income is often lifted to just above $1/day level of "extreme poverty." The government is able to pat itself on the back and compliment itself for being a government "with human feeling" while pointing to lower levels of extreme poverty. Yet one has to question just how much poverty alleviation comes from these fairly meager stipends.


Jorge Ávalos said…
This is a very interesting topic. But I have to warn you that all of the main economic indicators in El Salvador are about to change because the population growth estimations were so wrong. Instead of 7.1 million people we have 5.9 million. This means that we are, in fact, the most violent country in the Americas despite a significant drop in homicides. But this also means that we will loose, as a nation, millions of dollars in international aid because we will no longer be as poor as statisticians thought we were. Same total income for the whole nation but a million a half less people gives us more income per capita. Weird. We might become, before the end of the year, in relative terms, a country as rich as Mexico.