SUBJECT: The return of poverty indicators to pre-crisis levels.
SIGNIFICANCE: Poverty indicators deteriorated sharply in the aftermath of the 2001-02 economic crisis. Although they have returned to pre-crisis levels, poverty remains high in the northern provinces and in the suburbs of Buenos Aires, with structural factors preventing people from escaping the "poverty trap". In addition, there are doubts over the methodology used to measure poverty.
ANALYSIS: According to the National Statistics Institute (INDEC), in the second half of 2006, 1.4 million households, equivalent to 6.45 million people, remained below the poverty line:
• The percentage of individuals below the poverty line reached 26.9% of the total population in the second half of 2006, down from 33.8% in the same period of 2005 -- and down by half in comparison with the peak of 54.0% reached in the first half of 2003.
• Households below the poverty line reached 19.2% in the period, down from 24.7% in the second half of 2005 and a 55.0% fall in comparison with the 2003 record of 42.7%.
Of the total number below the poverty line in the second half of last year, 453,000 households (and 2.1 million individuals) were indigent. However, indigence indicators showed a more marked improvement, since:
• individuals defined as indigent reached 8.7% in the second half of 2006, compared to 12.2% in the same period of 2005 and 27.7% in 2003; while
• households defined as indigent declined to 6.3%, down from 8.4% in 2005 and 20.4% in 2003.
The percentage of individuals below the poverty and indigence lines is usually higher than that of households, due to the fact that poor households have a larger number of members than non-poor ones. Calculations of poverty and indigence are based on the cost of a basic basket of consumer goods; at present, a family of four is estimated to need some 915 pesos (297 dollars) per month to subsist above the poverty line, and some 430 pesos not to be classed as indigent.
Poverty indicators at a national level are available only since 2003. However, for the metropolitan area of Buenos Aires, data are available from 1988. In this area, poverty indicators reached a minimum in 1994, when the poor accounted for only 16.1% of the population. However, poverty trended upward thereafter: in 1996 it reached 27.9% of the population, although it descended to 24.3% in 1998. After reaching a peak of 54.3% in 2003, poverty figures declined subsequently, although at present they remain at a level similar to that of 1998.
Geographical concentration. Poverty is geographically concentrated in the northern provinces, which have historically been affected by poor living conditions:
Argentina: Population below poverty and indigence lines by region percentage of total population, 2nd half 2006
Poverty Indigence Total 26.9 8.7
Buenos Aires metropolitan area 25.5 8.0
-- City of Buenos Aires 10.1 2.6
-- Suburbs 30.2 9.7
Cuyo region 26.3 7.2
Northeast 45.7 15.9
Northwest 39.1 12.6
Pampas region 22.6 7.8
Patagonia 15.9 5.7
• In the northeast, individuals living below the poverty line accounted for 45.7% of the population in late 2006, with a peak of 48.1% in Resistencia, the capital of Chaco province. This region also leads indigence indicators, with 15.9% of population living below the indigence line.
• Northwestern provinces also report high poverty and indigence levels, with 39.1% of population below the poverty line and 12.6% considered indigent.
• The Buenos Aires metropolitan area (excluding the Federal Capital) also suffers from poor social indicators: 30.2% of individuals are poor and 9.7% are indigent.
• By contrast, the southern Patagonia region remains the area with the lowest poverty indicators, as has traditionally been the case, with the lowest rates reported in the province of Santa Cruz -- where only 5.8% of people fall below the poverty line and 0.8% are indigent.
• The central Pampas region, which is benefiting from high international prices for agricultural commodities, also have rates lower than the national average, as well as Mendoza.
• The city of Buenos Aires enjoys favourable living conditions, although the percentage classed as poor and indigent is higher than in 1999.
Social assistance programmes. INDEC also estimates the contribution of the Plan Jefes y Jefas de Hogar (the Heads of Family Plan, a national social welfare programme for unemployed heads of household) in the reduction of poverty and indigence. According to INDEC, in the absence of this plan the percentage of individuals classed as poor would have been 12.6% higher, with indigence rates 3.0% higher. However, the plan's contribution to poverty reduction has declined: in 2003, poverty rates would have been 14.6% higher in its absence. By contrast, the indigent population would have been only 1.5% greater without the plan. The existence of the plan may help to explain why, in cities such as San Luis and La Rioja, where political patronage is widespread, poverty indicators are higher than the national average but, conversely, indigence indicators are lower.
Methodological problems. The reduction of poverty is accounted for by robust economic growth averaging 9% in the past four years, the fall in unemployment (from 20.4% in 2003 to 8.7% in 2006), and the improvement in real incomes. However, the reliability of poverty data is doubtful:
• INDEC employees have accused the government of manipulating statistics, particularly those related to the evolution of the consumer price index. This index is used to calculate the price of the basket of basic consumer goods used to define poverty.
• In addition, there are doubts as to whether this basket is truly representative of present consumption habits: the basket used was compiled on the basis of a survey of household spending conducted in the mid-1980s, and it has not yet been updated with the results of a new survey conducted in 1996-97.
According to a study conducted by the trade union association Central de Trabajadores Argentinos, if a basket based on updated consumption patterns were used, some 35.0% of the population would have been classed as poor in the second half of 2006, well above the 26.9% reported by INDEC.
The "poverty trap". Although figures show that the number of people that are rising out of poverty and indigence is higher than the number falling below the poverty line, the percentage trapped in poverty remains high. In effect, 44% of those who were poor in 2005, and 47% of those classed as indigent, remained so in 2006. The factors that perpetuate the "poverty trap" include a higher incidence of unemployment and informal employment, and a lower human capital stock, than in non-poor households. These factors help to explain persistent high poverty in a context of fast economic growth, and highlight the need for a comprehensive approach to reduce them, including a tax and labour reform reducing the incentives for informal labour, and an education reform which aims to increase the number of students completing secondary school.
CONCLUSION: The improvement in poverty indicators is mainly the result of robust economic growth and falling unemployment. However, structurally high poverty rates in some provinces show that growth alone is insufficient to achieve a major improvement in social conditions, pointing to the need for a more comprehensive approach to tackling poverty