Nearly $10 trillion needed to end poverty by 2030, says ILO

Describing progress in combating poverty thus far as uneven and fragile, the International Labour Organization has stated that almost $600 billion is needed a year to eradicate poverty by 2030, and that sustainable poverty reduction demands the availability of decent work.

by Kanaga Raja

GENEVA: Some $600 billion a year, or nearly $10 trillion over a period of 15 years, is needed to eradicate extreme and moderate poverty globally by 2030, a new International Labour Organization (ILO) report has said.

In its World Employment and Social Outlook 2016 report, the ILO said that it will not be possible to reduce poverty in a lasting manner without decent work. In other words, decent work is a necessary (though not sufficient) condition for eradicating poverty.

“Clearly, the Sustainable Development Goal of ending poverty in all its forms everywhere by 2030 is at risk,” said ILO Director-General Guy Ryder, in an ILO news release. “If we are serious about the 2030 Agenda [for Sustainable Development] and want to finally put an end to the scourge of poverty perpetuating across generations, then we must focus on the quality of jobs in all nations.”

“Right now, while 30% of the world is poor, they only hold 2% of the world’s income,” said Raymond Torres, ILO Special Advisor on Social and Economic Issues. “Only through deliberately improving the quality of employment for those who have jobs and creating new decent work will we provide a durable exit from precarious living conditions and improve livelihoods for the working poor and their families.”

Decline in poverty

The ILO report uses the poverty lines as recently revised by the World Bank – $1.90 PPP (purchasing power parity) per capita per day to measure extreme poverty, $3.10 for moderate poverty and $5.00 as complementary poverty measures in Latin America and the Caribbean and Europe and Central Asia.

According to the report, the incidence of poverty in emerging and developing countries, regardless of the threshold, has declined considerably over the past two decades.

Among 107 emerging and developing countries in 2012 – the latest year for which data are available for the vast majority of countries – the share of the total population in extreme poverty was just under 15%. This was down significantly from 46.9% in 1990 – when the initial international commitments to reduce poverty were undertaken – and 25.2% in 2005, yet it still translates into the fact that close to 1 billion (i.e., 940 million) people were living in extreme poverty globally in 2012.

Moreover, if the poverty line is raised to include the moderate poor, i.e., people with income or consumption below $3.10 PPP per day, the number is more than doubled, reaching 2 billion people, or 36.2% of the emerging and developing world’s population, in 2012 (although this was significantly down from the 67.2% recorded in 1990).

Middle-income countries accounted for much of the decline in extreme and moderate poverty. The pace of poverty reduction was slower among low-income countries and, as a result, the shares of those on less than $1.90 PPP per day and less than $3.10 PPP per day remained high in 2012, at 47.2% and 73.6%, respectively (compared with 69.0% and 86.8% in 1990).

“The marginal improvements in extreme and moderate poverty are likely to be an indication that some individuals moved from extreme poverty to moderate poverty,” said the report.

Progress, however, has been uneven, said the ILO. While improvements have been significant in a number of countries, notably China and much of Latin America, the incidence of poverty remains stubbornly high in Africa and parts of Asia.

Moreover, in developed countries, an increase in poverty has been recorded, especially in Europe. It is estimated that, in 2012, over 300 million people in developed countries were living in poverty (defined in relative terms on the basis of incomes representing less than 60% of the median income).

The report said looking at poverty trends across broad geographical regions, excluding developed countries, reveals that improvements in Asia and the Pacific have been exceptional. For instance, the share of people in extreme poverty dropped by over 46 percentage points between 1990 and 2012, to reach 12.2% in 2012. This was driven in particular by China and, to a lesser extent, India.

Similarly, countries in Latin America and the Caribbean made significant progress towards the eradication of extreme poverty, with the share of people living in extreme poverty falling from 21.2% in 1990 to 5.9% in 2012.

In both instances, however, the shares of the population living on less than $3.10 PPP per day – 36.2% and 13%, respectively – indicate that challenges remain.

Progress among African countries was less pronounced, as more than 40% of the African population continued to live in extreme poverty and some 64% in extreme or moderate poverty.

Poverty by population group

The ILO said that the gains have also been uneven across population groups.

Poverty affects women disproportionately, and children to an even greater extent. In emerging and developing countries, more than half of all children under the age of 15 live in extreme or moderate poverty. In developed countries, 36% of all children live below the relative poverty line.

Even where progress has been made, gains remain fragile. A significant proportion of those who moved out of poverty continue to live on just a few dollars per day, often with limited access to essential services and social protection which would allow them to exit precarious living conditions on a more permanent basis.

Also, in those developed countries where quality jobs are scarce, there is growing anxiety among middle-class families about their ability to sustain their income position.

A significant portion of the poor are outside the scope of the labour market, i.e., they are either children or above the age of 65. In fact, among emerging and developing countries, 43% of the extreme poor were below the age of 15 or above the age of 65 in 2012, compared with 30% of the non-poor. Children constituted the largest portion of those of non-working age in extreme poverty, making up 38% of the extreme poor, compared with 24% of the non-poor.

The situation was particularly critical in low-income countries: 45% of all children lived in extreme poverty and nearly 77% in extreme or moderate poverty in 2012. In middle-income countries, the incidence of poverty among children was lower, but still close to one in four (22%) children lived in extreme poverty and nearly one in two (just under 50%) lived in extreme or moderate poverty.

In developed countries, similar trends have prevailed: 37% of the poor were either children or aged 65 or above (compared with 32% among the non-poor), with children accounting for the vast majority among this group. With respect to rates of poverty, in developed countries one-third of all children lived in poverty (measured as less than 60% of national median income per capita).

Across the range of country groupings, in 2012, the majority of the poor were of working age, i.e., between the ages of 15 and 64. Among them, those who were active, i.e., either employed or looking for work, made up a slightly higher share of the poor.

In emerging and developing countries, 57% of the extreme poor and 61% of the moderate and extreme poor were aged 15-64 (compared with 70% and nearly 73%, respectively, among the non-poor). However, the incidence of poverty in these countries was lower among people of working age (14% were extreme poor and 36% were extreme or moderate poor) than among children or elderly.

In developed countries, the majority of the poor were of working age (63%) and, in contrast to emerging and developing countries, the poor were more likely to be inactive than the non-poor. Moreover, said the ILO, the poverty rate for the inactive in this group of countries  (30%) was significantly higher than for those who were either employed or looking for work (17%).

Working poverty

In emerging and developing countries, in 2012, 13.7% of workers were in extreme poverty, representing some 367 million people living on less than $1.90 PPP per capita per day. The share of employed people living on less than $3.10 PPP per day remained comparably higher, accounting for over one-third (34.9%) of the employed population across emerging and developing countries (more than a quarter across middle-income countries and almost 70% among low-income countries). “Overall, this means that in emerging and developing countries, over 1.2 billion workers were in extreme or moderate poverty in 2012.”

In developed countries, the incidence of relative working poverty (on a per capita basis) among 37 developed countries stood at around 15.0% of the employed population in 2012, affecting over 70 million workers. Figures for European countries only based on an adult equivalent scale show that working poverty in the EU increased from 11.9% in 2005 to over 13.3% in 2012.

Unlike in emerging and developing countries, the incidence of unemployment is relatively high among the poor in developed countries. In 2012, this translated into relatively high poverty rates of 42.7% among the unemployed compared with a total average poverty rate of 22% when determined on a per capita basis. Wage and salaried workers were less affected by relative poverty than the self-employed. Among the self-employed, the poverty incidence ranges from 16.8% among employers to 25.8% among contributing family workers.

In 2012, 88% of the extreme working poor in emerging and developing countries were in rural areas. In fact, extreme poverty rates were four times higher in rural areas than in urban areas. And the rural/urban divide becomes even more apparent when considering poverty rates for people in employment. Nearly 20% of people employed in rural areas were living in extreme poverty, compared with just over 4% in urban areas (rising to 48.5% and 13.9%, respectively, when considering extreme and moderate poverty).

In developed countries, said the ILO, the majority of the working-age population live in urban areas. However, the incidence of poverty across inactive, unemployed and employed was slightly higher in rural areas than in urban areas.

According to estimates based on 43 emerging and developing countries, nearly two-thirds of all the working extreme poor were employed in agriculture – the figure declined somewhat (to nearly 60%) when considering moderate and extreme poverty together.

In terms of rates of poverty, a quarter of those employed in agriculture were in extreme poverty, compared with just 12% of those employed in industry, and only 7% of those employed in services. The strong incidence of poverty in agriculture is a common feature of all developing regions.

Based on a smaller set of countries (due to limitations in data availability), the evidence shows that the working poor tend to hold jobs that require low skills. In fact, in 2012, in the 17 emerging and developing countries for which detailed estimates were available, 43% of workers in extreme working poverty were employed in occupations that typically require low skills, i.e., equivalent to primary education or less. In contrast, among the non-poor, only 18% worked in occupations that required low skills.

“Not surprisingly, the rate of extreme poverty among the low skilled, at 26.2%, was more than double and nearly ten times the rates for medium and high-skilled workers, respectively,” said the report.

Income gap

Estimates suggest that, in 2012, $120 billion would have been needed to eliminate extreme poverty in the world. The income gap for eliminating extreme poverty represents 0.16% of total income available in the world and 0.31% of total income available in emerging and developing countries, but over 5% in developing countries alone.

To eliminate both extreme poverty and moderate poverty (defined as incomes or consumption expenditure below $3.10 PPP per day), nearly $600 billion would be needed. According to the report, this represents 0.8% of global income, 1.7% of the income available in emerging and developing countries, 1.4% in emerging countries and 21% of gross domestic product (GDP) in developing countries alone.

The amount of income needed to eliminate poverty (defined at $5 PPP per day) is in excess of $2 trillion.

In developed countries, the income needed to bring all the poor above the relative poverty line (defined as 60% of median household income) is estimated at $850 billion, or 1.7% of the total income of developed countries in 2012. This amount represents 4.2% of total government expenditure and 7.8% of public social protection expenditure.

“A continuation of the uneven and fragile progress in reducing poverty may compromise the achievement of the Sustainable Development Goals (SDGs) adopted by the United Nations in September 2015, including both SDG 1 – to end poverty in all its forms and everywhere by 2030 – and many of the other SDGs,” the report warned.

Already, although they represent 30% of the world’s population, the poor receive less than 2% of the world’s income. So, unless action is taken, poverty will tend to perpetuate itself across generations. This may exacerbate socioeconomic instability and erode support for pro-growth policies.

Decent work

The ILO said it will not be possible to reduce poverty in a lasting manner without decent work. In other words, decent work is a necessary (though not sufficient) condition for eradicating poverty. Its estimates suggest that nearly $10 trillion is needed to eradicate extreme and moderate poverty by 2030.

However, said the ILO, this cannot realistically be achieved by income transfers alone. The solution requires more than simply the availability of resources. Indeed, the ability of people to sustain themselves through good jobs will need to be enhanced.

Almost one-third of the extreme and moderate poor in emerging and developing countries actually have a job. However, these jobs are vulnerable in nature: they are sometimes unpaid, concentrated in low-skilled occupations and, in the absence of social protection, the poor rely almost exclusively on labour income. In addition, two-thirds of the jobs are in typically low-productivity agricultural activities.

Among developed countries, said the ILO, a greater number of workers have wage and salaried employment, but that does not prevent them from falling into poverty. In fact, more than 80% of the working poor in developed countries are in wage and salaried employment.

“Without an adequate supply of decent work opportunities, it will be difficult for the working poor to improve their working conditions, acquire a career and thus lift themselves and their families out of poverty.”

The ILO highlighted a number of key structural obstacles that it said are impeding quality employment creation and poverty reduction: a narrow economic base; widening income inequality resulting from a number of factors; and a weak institutional set-up that marginalizes the vulnerable groups.

The report said that each of these three obstacles can be addressed through decent work and by enhancing the ability of enterprises to create quality jobs.

In this context, it recommends, amongst others, broadening the productive base through the promotion of sustainable enterprises, strengthening rights at work as well as labour market institutions, and enhancing the effectiveness of employment and social policies and extending  their  reach. (SUNS8244)         

Third World Economics, Issue No. 616/617, 1-31 May 2016, pp20-22, 28