The Living Income
Community of Practice
Adjusting poverty lines
Another method for estimating living income involves using existing poverty lines as a proxy. In this case, the cost of a decent standard of living is not calculated, and instead international and/or national poverty lines are multiplied by a factor to account for other areas of spending not considered in the original poverty calculation (e.g. non-food expenses). This factor is usually determined using national or regional expenditure data.
The main difference is that poverty lines are typically set based on actual expenditure patterns without determining normative standards. For example, the extreme poverty line typically reflects the costs of a food basket that is strictly enough to survive. In sharp contrast, other methods of calculating living income (e.g. the Anker Methodology) determine standards for food and housing and determines the cost of such standards in a local setting.
An important possible caveat of adjusting poverty lines is that, because poverty lines themselves are often reflections of actual expenditure patterns, setting standards on such patterns risks reproducing them. In other words, current expenditure on food may be enough for survival but it does necessarily mean that food is decent, healthy and nutritious. In this case, it would therefore may be risky to take poverty lines as a reference for living income if they do not properly and accurately account for decency.
However, in the absence of an existing living income or living wage benchmark, using poverty lines as a reference can be cost-efficient. Given the finding that living wage/income benchmarks are consistently higher than national poverty lines, it costs very little to add a mark-up on top of the poverty line to approximate a living income, (although not necessarily accurate or rigorous).
A recent comparison of different poverty lines and Anker methodology benchmarks (above) concluded that national poverty lines are better suited to provide intermediate benchmarks and that combining various benchmarks in a ladder can be a very useful tool. For example, living income benchmarks based on the Anker Methodology could be become medium to longer-term targets, while different poverty lines can be considered in the closer future as steps towards living income. Different benchmarks can also facilitate to differentiate target groups and potential intervention strategies.
Click here to read a report on using proxy benchmarks for living income.
An example of an income ladder comparing benchmarks and lines to actual incomes in the Malawi tea sector.
Above: A presentation by Dr. Dimitrios Minos on his research into using poverty lines as income benchmarks.
Progress Out of Poverty Index Poverty Proxy
The Progress Out of Poverty Index (PPI) is a poverty measurement tool and scoring system used to determine the likelihood that a household or community is living in poverty (without the need to directly measure income). A set of standardised questions are asked to household members, the answers to which are translated into an index score which indicates the poverty likelihood.
Although it does not provide an exact number for actual incomes in can be used to monitor progress towards income improvement targets. Because of the nature of PPI however, it is very difficult to draw accurate comparisons with living income benchmarks. Despite this, it does allow the income situation of households and communities to be monitored and changes identified in a cost-effective and time-efficient manner.
Above: A webinar with a speaker from the IPA who explains how the PPI works. A guest from Swiss Contact also discusses how they have used the PPI in their work.