ASIA
26 March 2014
Asia's poor and vulnerable population
In developing and emerging Asia, most people who have been lifted out of poverty have moved into a "vulnerable" group, and are not yet in the middle class.
Asia's miracle development has driven unprecedented reductions in poverty. This is usually measured in terms of a $1.25 a day poverty line, estimated by the World Bank. If you are living on $1.26 a day, you are not living in poverty!
But according to the recent World of Work report by the International Labour Organisation, measures of poverty should vary according to a country's level of economic development, as costs of living vary enormously.
What's more, in developing and emerging economies, both in Asia and elsewhere, most people who have been lifted out of poverty, have moved into a "vulnerable" group, and are not yet in the middle class. And this vulnerable group is very much at risk of falling back into poverty -- all the more so given that Asian economic growth is set to slow, and unemployment in the region will increase.
These factors have led the ILO to conduct a forensic analysis of poverty and the middle class, by differentiating between the situations in low income, lower-middle-income, and upper-middle-income countries. The overall conclusion is that much more people are living in poverty or near-poverty than suggested by simple estimations based on poverty lines of $1.25 or even $2.00 a day.
Low income countries are those like Bangladesh, Cambodia or Nepal with an annual national income of less than $1,025. For these countries, those people living on less than $2 a day are classified as "poor", while those living on $2-4 a day are in the vulnerable group, and those living on $4-13 a day are put in the middle-income group.
Bangladesh, Cambodia and Nepal have enjoyed large reductions in poverty, but the middle classes remain very small, as many people have simply moved out of poverty and into the vulnerable group of the population.
Lower-middle-income countries like India, Indonesia, Vietnam and Sri Lanka have an annual income in the $1,026-4,035 range. The poverty line remains $2 a day. But since costs of living are higher for this group of countries, the scope of the vulnerable group is widened to $2-6, while $6-20 a day represents the middle income group.
Again, a similar story emerges, with much of those who have been lifted out of poverty moving into the vulnerable group. Middle classes remain small in these four Asian countries. In India, the poor and vulnerable combined represent 97% of the population.
Upper-middle-income countries like China, Malaysia and Thailand have an annual income in the $4,036-12,475 range. While incomes are higher, so are costs of living. Thus the poverty line for these countries put at $4 a day, meaning that much higher shares of the population are estimated to live in poverty. Those people living on $4-10 a day are considered to be in the vulnerable group, while an income of $10-50 a day is defined as being middle class.
On this basis, some 90% of China's population is still living in either poverty or in the vulnerable group, notwithstanding the massive reduction in the share of the population living on less than $1.25 a day. Even in strong performers like Thailand and Malaysia, large shares of the population remain in either poverty or in the vulnerable group, around 80% and 50% respectively.
This ILO analysis is important, even if it merely confirms what anyone who visits a developing or emerging country in Asia would know instinctively. In short, while the lives of people in developing and emerging Asia have improved greatly, the overall situation is still far from satisfactory for too many people.
And as the ILO also reminds us, large shares of Asia's working population have "informal employment", and this is not decreasing. This means that they work without contracts, minimum wages, social protection or labor rights. Involuntary temporary and part-time employment has been increasing, meaning that many people who would like a full-time job have to settle for less.
Income inequality remains high in Asia, especially in countries like China, the Philippines and Thailand. Advanced Asian economies like Korea and Taiwan are also experiencing a decline in their middle classes. And as economic growth is now slowing down in Asia, unemployment is set to rise.
In conclusion, while the cup of Asian development is half full with positive results, it still remains very much half empty. And as the world economy continues to merely wobble forward, we remain in treacherous territory, where many people in the vulnerable population could easily fall back into poverty.
Executive Director
Asian Century Institute
www.asiancenturyinstitute.com
But according to the recent World of Work report by the International Labour Organisation, measures of poverty should vary according to a country's level of economic development, as costs of living vary enormously.
What's more, in developing and emerging economies, both in Asia and elsewhere, most people who have been lifted out of poverty, have moved into a "vulnerable" group, and are not yet in the middle class. And this vulnerable group is very much at risk of falling back into poverty -- all the more so given that Asian economic growth is set to slow, and unemployment in the region will increase.
These factors have led the ILO to conduct a forensic analysis of poverty and the middle class, by differentiating between the situations in low income, lower-middle-income, and upper-middle-income countries. The overall conclusion is that much more people are living in poverty or near-poverty than suggested by simple estimations based on poverty lines of $1.25 or even $2.00 a day.
Low income countries are those like Bangladesh, Cambodia or Nepal with an annual national income of less than $1,025. For these countries, those people living on less than $2 a day are classified as "poor", while those living on $2-4 a day are in the vulnerable group, and those living on $4-13 a day are put in the middle-income group.
Bangladesh, Cambodia and Nepal have enjoyed large reductions in poverty, but the middle classes remain very small, as many people have simply moved out of poverty and into the vulnerable group of the population.
Lower-middle-income countries like India, Indonesia, Vietnam and Sri Lanka have an annual income in the $1,026-4,035 range. The poverty line remains $2 a day. But since costs of living are higher for this group of countries, the scope of the vulnerable group is widened to $2-6, while $6-20 a day represents the middle income group.
Again, a similar story emerges, with much of those who have been lifted out of poverty moving into the vulnerable group. Middle classes remain small in these four Asian countries. In India, the poor and vulnerable combined represent 97% of the population.
Upper-middle-income countries like China, Malaysia and Thailand have an annual income in the $4,036-12,475 range. While incomes are higher, so are costs of living. Thus the poverty line for these countries put at $4 a day, meaning that much higher shares of the population are estimated to live in poverty. Those people living on $4-10 a day are considered to be in the vulnerable group, while an income of $10-50 a day is defined as being middle class.
On this basis, some 90% of China's population is still living in either poverty or in the vulnerable group, notwithstanding the massive reduction in the share of the population living on less than $1.25 a day. Even in strong performers like Thailand and Malaysia, large shares of the population remain in either poverty or in the vulnerable group, around 80% and 50% respectively.
This ILO analysis is important, even if it merely confirms what anyone who visits a developing or emerging country in Asia would know instinctively. In short, while the lives of people in developing and emerging Asia have improved greatly, the overall situation is still far from satisfactory for too many people.
And as the ILO also reminds us, large shares of Asia's working population have "informal employment", and this is not decreasing. This means that they work without contracts, minimum wages, social protection or labor rights. Involuntary temporary and part-time employment has been increasing, meaning that many people who would like a full-time job have to settle for less.
Income inequality remains high in Asia, especially in countries like China, the Philippines and Thailand. Advanced Asian economies like Korea and Taiwan are also experiencing a decline in their middle classes. And as economic growth is now slowing down in Asia, unemployment is set to rise.
In conclusion, while the cup of Asian development is half full with positive results, it still remains very much half empty. And as the world economy continues to merely wobble forward, we remain in treacherous territory, where many people in the vulnerable population could easily fall back into poverty.
Author
John WestExecutive Director
Asian Century Institute
www.asiancenturyinstitute.com