Income Disparity and Poverty Alleviation Analysis

Introduction

Amartya Sen, Nobel prize winner of the economics, he said that the main objective of The development is to enhance human freedoms. The process of evolution can increase the human capabilities, skills, knowledge, attitudes and improve the human lives and not the richness of the economy which is an only area of it.

 What is Poverty?

Poverty Is not a lack of money. Simply debt is the lack of basic needs. Ex. Food, shelter, water. Amartya Sen said that poverty is not a lack of funds. It is not having the capability to get one's full potential as a human being. Debt is a multidimensional concept. It relates to the many sections of the economy. There are education, health, infrastructure, employment, etc. (Appendix 01)

Types of poverty

There are two kinds of debt,

1.      Absolute poverty

2.      Relative poverty

Ø  Absolute poverty relates to the lack of basic needs in a considerable period in the economy. Ex: food, clean water, and housing.

Ø  Relative poverty occurs when people in a country do not enjoy a certain minimum level of living standards as compared to the rest of the population and so would change from state to Country or sometimes within the same country. Ex: A family can be considered as a sick family if they cannot get vacations, cannot buy gifts for children, relations to festival season, and cannot send their children to higher education such as a university.

What is the income disparity?

Income includes the sum of wages, salaries, interest on the savings account, dividends, rent, profit, and other forms of earnings received in a specific period. Income disparity is the unequal distribution of household income or individual income in an economy or the gap between the wealthy and needy persons in the marketplace. (Appendix 02)

What is the difference between income disparity and poverty?

Ex: In a land where everyone lives in muddy huts. They haven’t income disparity. But they suffer from poverty. There is no clear linkage between debt and income disparity. Reducing poverty doesn’t lead to reduce income disparity, and reducing income disparity doesn’t go to directly alleviate poverty.  In some cases, people suffer from income disparity in life, sometimes they also live in poverty. Some countries that have higher income disparity often have many people live in poverty.

We can measure poverty, only one person. We can say that a person living in poverty. Inequality requires multiple people and measure different between those persons. But we wouldn't know that a person is living difference.

What are the factors that cause poverty?

Most analysts Were agreed that there is no single section to affect poverty. Because Poverty is the multidimensional concept.

1.      History of the country

2.      Civil War and political conflicts of the country

3.      Gender inequality

4.      Natural disaster

5.      Lack of education, training, and skills

6.      Overpopulation

7.      Unemployment

Measurements of poverty (Appendix 03)                                          

Absolute poverty measurements

1.      Poverty line- The lowest incomes level that minimum standard of living for an individual. If someone below the official poverty line, that person cannot fulfill their basic needs. Therefore that person considered as a most miserable person. Using the headcount ratio, we can define the poverty line. (Appendix 04)

2.      Human Development Index

The Human Development Index (HDI) was introduced by the United Nations development Program in 1997. The HDI measures the three primary dimensions. There are along and healthy life, knowledge, and lack of essential services.

             Relative poverty measurements

1.      Lorenz curve

Lorenz curve was introduced by American economist Max Lorenz in 1995. The Lorenz curve explains the graphical representation of the income disparity in the economy. If the near the perfect equality line, income disparity is decreasing. If the deviation from the ideal equality line, income disparity is increasing. (Appendix 05)

2.      Gini coefficient

Gini coefficient used to measure the inequality of income and wealth in the country. If the Gini coefficient is equal to zero, there is perfect equality. Everyone has the same income in the economy.

(Appendix 06)

Poverty Alleviation

Poverty cannot be stopped entirely. The main objective of the Poverty alleviation is to increase the quality of life for poorest people in the country. It involves the tools which reducing poverty such as education, economic development, health, and income redistribution.

What are poverty alleviation methods?

Ø  Increasing Supply of basic needs. Ex: clean water, food, and shelter

Ø  Increasing the health care facilities

Ø  Giving quality education

Ø  Providing skills and training programs

Ø  Income redistribution

Ø  Increasing personal income for low-income people

Major poverty alleviation programs in Sri Lanka

·         The Janasaviya programme.

This program was introduced in October 1989 of the Premadasa’s government (UNP). The primary objective of the Janasawiya poverty alleviation program was to transform impoverished households into sustainable economic units through increase cash and credit facilities.

How it was implemented? Each poor family received a monthly grant per months. The Samurdhi program was launched in 1995, replacing the Janasawiya program. Several factors affect the declining Janasawiya program.

Ø  Characteristics of political actors: Janasawiya program which was introduced by the supporters Who was close to the president Premadasa. Therefor created a political situation to measure the poverty alleviation.

·         The Samurdhi program

Samurdhi means prosperity, the Samurdhi program was started in 1995 as the national poverty reduction program and according to the central bank of Sri Lanka. Today nearly 1.6 million families are covered. The vision is prosperous Sri Lanka with minimized poverty. The Samurdhi programs are divided into six major areas. There are Social welfare, social, insurance, infrastructure development, microcredit, income generation, and socio-cultural development.

No of the beneficiary family has declined in the recent year. However, the overall budget for the Samurdhi program has increased in the last year. (Appendix 07) But there are lots of advantages to this Samurdhi program. This program includes several strategies to alleviate poverty. Ex: social security’s funds provide for reducing risks for life cycle events such as death, marriage, illness, childbirth. And under this Samurdhi program contain the individual subprograms. There are Samurdhi housing, rural infrastructure, and Samurdhi bank. However According to changing the political parties to improve the beneficiary families. Due to the poor targeting who really felt poverty unable to receive the benefit.

·         Divineguma national program

Divineguma national program is the latest poverty alleviation program introduced by the Mahinda Rajapaksha Government. The mission of this program is to establish 2.5million healthy and economically empowered household units, covering all the villages in the Sri Lanka. The Divineguma program includes activities such as the cultivation of fruits, vegetables and home gardening.

·         Gamidiriya community development and live hood improvement

Program

This program was initiated in 2004. Gamidiriya has funding received from the World Bank for 12 years. This program includes several poverty alleviation tools. There are establishing buildings, community infrastructure development, and livelihood development.