Two countries, two types of poverty

In these times in which World Bank researchers have proposed an adjustment to the famous international poverty line of $1 (€0,74) a day and per person to $1.25, it’s interesting to make a comparative analysis of the national poverty line of a developed country, Germany, and that of a less developed country (LDC), Venezuela.

Let’s begin by the German case. Since in most countries of the European Union the problem of absolute poverty - which one could vaguely consider as a state in which the basic necessities to have a decent life are not satisfied- is quite rare, national statistical agencies are more concerned about measuring poverty in relative terms. The poverty line is then calculated from the median “equivalent income”, i.e. the equivalent income of the person who is just in the middle of the equivalent income distribution of the country, when these are ordered from the lower to the greater. The equivalent income is a scale developed by the Organization for Economic Co-operation and Development that allows comparing the income of households with different amount of members. To obtain this equivalent income a weight is given to each member of the household and its total income is then divided by the sum of the weights. The main income earner has a weight equal to 1, the spouse or children older than 13 have a weight of 0.5 and that of children younger than 14 is 0.3. The poverty line is defined as a level of equivalent income of 60% of the median one. For Germany in 2005 that line was located around €850 ($1,148) monthly. The percentage of the population living in conditions of poverty in that same year was 13.2%.

In the Venezuelan case, like in most LDCs, the type of poverty measured is the absolute one. In order to construct an absolute poverty line, a basic consumption basket is defined that assures a sustainable life condition. In Venezuela, the basket is constructed under the assumption that a person needs to consume at least 2,200 calories per day of food. On the basis of household surveys, the cost of a food basket, that covers the specified amount of calories and is composed by the staple foods of the country, is calculated. Thanks to the same household surveys, it is known that the expenses on goods and services different from food are almost the same as the expenses on food in population groups that have a food consumption around the 2,200 daily calories. The basic basket of consumption, or the poverty line, is then defined as the double of the cost of the food basket. The monthly poverty line per capita in 2005 was of BsF 74.23 ($27.49-34.53; €23.3-29.26). Under this poverty line lived between 37.9% and 43.7% of Venezuelans in that year.