Bangladesh Poverty Assessment: Building on Progress

Poverty Trends and Profile

Dhaka, October 23rd 2002

1. Trends in Poverty during the Nineties

Trends in Income Poverty

CBN poverty measures based on various HIES show:

• Decline of roughly one percentage point per year during the nineties

• Number of the very poor declined by only 2.7 million, and of poor remained unchanged

• Poverty higher in rural (53%) than in urban (37%) areas, but declined at roughly same rate

• Considerable regional variation: Highest in Rajshahi (61%) and lowest in Dhaka (45%)

• Poverty rates stagnated in Chittagong division

59%

43%

62.2

50%

34%

45.2 42.5

62.7

0

10

20

30

40 50

60

70

Upper line Lower line Upper line Lower line

Headcount Rate (%) Absolute Number (million)

1991-92 2000

Trends in Output and Employment

Progress … • Per capita GDP increased 36 percent

during the 1990s, twice the average for low and middle income countries

• The labor force grew by 1 million each year to 60 million in 1999-2000

• Private formal sector’s employment share went up from 9 to 14% between 1995-96 and 1999-00, while the public sector’s share remained at 4-5%

• Under-employment declined from 43% to 35% over the decade

• Labor force participation by women increased from 14% to 23%

… but …• Under-employment rates still very

high, indicative of considerable slack in the labor market

• Unemployment rates relatively low (3.7%), but are higher (9%) among young urban males (aged 15-29 years)

• Women still considerably less likely to participate in the labor force than men, and poor working women are at greatest risk of under-employment

• Number of child laborers down from 5.6 to 4.3 million between 95-96 and 99-00. However, one-fourth of children 10-14 estimated to be working rather than studying

Non-income Poverty Measures

Other indicators confirm progress during the 1990s…

• Rising real wages in agricultural, manufacturing, and construction sectors

• Improvements in quantities and composition of food bundle consumed. • per capita fish consumption up 9%• per capita sugar consumption up 11%• per capita meat consumption up 48%

• Anthropometric data suggests good progress in reducing child malnutrition

• Significant improvements in infant & child mortality, and in life expectancy

• Bangladesh has achieved gender and urban-rural parity in enrollment rates

• Evidence of reduced vulnerability to food price variation, and improved

disaster-coping mechanisms

Non-income Poverty Measures (cont.)

… but also illustrate the significant challenges that remain

• Malnutrition rates continue to be high

• Maternal mortality rate among the highest in the world

• Large share of population continues to be at risk to adverse impact of shocks

• Deteriorating law-and-order a source of rising concern, not just for the poor

• More than half (55%) of the population aged 7 and older illiterate

• Gains in enrollment appear to have tapered off or fallen in recent years

• Rising concern being expressed about quality of education imparted through

country’s education system

Impact of Growth and Inequality on Poverty

During the 1990s:• Growth in per capita expenditures

accompanied by rising inequality

• All groups benefited from growth, but the very poor and the better-off benefited relatively more from growth than the middle-class

• Rural areas experienced lower growth compared to urban, but growth was more broad-based in rural areas

Equivalent decline in the incidence of poverty in the two sectors

Growth Incidence Curve for Bangladesh, 1991-92 to 2000

1

1.5

2

2.5

3

3.5

4

0 10 20 30 40 50 60 70 80 90 100

% of population ranked by per capita expenditure

Ann

ual g

row

th in

per

cap

ita e

xpen

ditu

re

(%)

Growth in mean

Mean of growth rates

Rural and Urban Growth Incidence Curves1991-92 to 2000

0 0.5

1 1.5

2 2.5

3 3.5

4

0 10 20 30 40 50 60 70 80 90 100 Urban Areas

Growth in mean

Mean of growth rates

0 0.5

1 1.5

2 2.5

3 3.5

4

0 10 20 30 40 50 60 70 80 90 100 Rural Areas

Ann

ual g

row

th in

per

cap

ita

expe

nditu

re

(%) Growth in mean

Mean of growth rates

% of population ranked by per capita expenditures

2. Profile of the Poorin Bangladesh

Poverty Profile: Land & Education key Assets

Poor

Completed Middle

6%

Completed Primary

12%

Completed Secondary

3%

Completed Higher level1%

Less than Primary

4%

Not literate74%

Non-PoorLess than Primary

5%

Completed Primary

15%

Completed Middle

9%

Completed Secondary

6%

Completed Higher

7%

Not literate58%

Level of Education of Head:• Nearly three-quarters of the poor

population have an illiterate household head

• Incidence of poverty amongst those with an illiterate head eight times that of those with a head with higher education

Land ownership:• Three-fifths of the poor population in

Bangladesh own less than 0.05 acres

• Incidence of poverty amongst the functionally landless is more than three times that of the population owning 2.5+ acres

Poor

Less than 0.05 acres

58%

0.05-0.49 acres15%

2.5 + acres5%

0.50-1.49 acres16%

1.50-2.49 acres6%

Non-Poor

1.50-2.49 acres13%

0.05-0.49 acres11%

0.50-1.49 acres20%

2.5 + acres21%

Less than 0.05

acres35%

Other Household Assets• Considerable disparities in other asset ownership (health, housing,

business assets, etc.) Asset ownership Gini 0.7 vs. Income Gini of 0.4

• Asset portfolios of the poor also differ from those of the rich

Livestock

Fin. Assets and savings

Family business assets

Other farm assets Non-operated land or property

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

1 2 3 4 5 6 7 8 9 10 Wealth Decile

Urban Areas

Asset Portfolios Profile

Livestock

Fin. Assets and savings Family business assets

Other farm assets

Non-operated land or property

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

1 2 3 4 5 6 7 8 9 10 Wealth Decile

Rural Areas

Sources of Income of the Population

• Income earning strategies are heterogeneous across and within different types of households

• High dependence of the poor on daily wage labor income

• Agriculture (crops, livestock, fishing) is an important source of income, although its importance declines steadily with income

• Even for the poorest tenth of the population, 40% of income is from non-farm sources

Sources of Income by Income Decile

Daily wages

Salaries

Agriculture

Self- employment

Other

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

1 2 3 4 5 6 7 8 9 10

Some Findings of Wage and Per Capita Expenditure Regressions

Wage analysis shows that labor markets in Bangladesh attach premiums to:

• Education, for both men and women

• Non-farm employment relative to agricultural daily wage labor

• Public sector jobs relative to those in the private sector

• Location closer to metropolitan centers

Per capita expenditures in Bangladesh are positively correlated with:

• Land ownership: Household that own up to 0.5 acres have 7% higher expenditures than landless households

• Common-property resources: Expenditures are 2-3% higher on average in villages where such assets are present

• Infrastructure: Expenditures are between 6-12% higher in villages with electricity, phones, and a nearby bus stop

Poverty Projections under Alternate Growth ScenariosProjections based on Bangladesh’s growth record over the nineties suggest that an

acceleration in growth rate to 6 percent per annum needed to halve poverty by 2015

31%

25% 20%

50%

18% 13% 10%

34%

0 5

10 15 20 25 30 35 40 45 50

2000 2005 2010 2015 Year

Hea

dcou

nt in

dex

4.5% growth 6.0% growth 7.5% growth

Upper Poverty Line

Lower Poverty Line