Economic Research Forum (ERF)

Multidimensional poverty in the poorest parts of MENA: agenda for action

A new measure of household poverty in the Arab countries provides the basis for tailored solutions across the region. This column reports the key findings of the first Arab Multidimensional Poverty Report and outlines an agenda for policy action.

In a nutshell

The ‘multidimensional poverty index’ challenges the conventional wisdom that extreme poverty is rare and moderate poverty is low in the Arab region.

Poverty and inequality are serious in all countries, but the real challenge for middle-income countries is to deal with vulnerability; for the least developed countries, the urgent need is to alleviate extreme poverty.

All countries must explore policy options to ensure that every child enrols and stays in school to obtain the full course of compulsory education.

In September 2017, the first Arab Multidimensional Poverty Report was published as a result of three years of research and policy debate by the United Nations Economic and Social Commission for Western Asia (ESCWA), the United Nations Children’s Fund (UNICEF) and the Oxford Poverty and Human Development Initiative (OPHI) under the umbrella of the League of Arab States.

This extensive collaboration had one main goal: to rethink the measurement of child and household poverty from a regional perspective; and to offer tailored policy solutions that can step up poverty reduction efforts.

Developing an Arab Multidimensional Poverty Index

The departure point for measuring household poverty was the global ‘multidimensional poverty index’ (MPI), which was revised and adapted via an iterative consultative process with regional and global experts, as well as more than 200 representatives of governments in the region, all to define poverty dimensions and indicators that are of relevance to the region’s diverse social and economic contexts and challenges.

The resulting Arab MPI is composed of three dimensions and 12 indicators. The education dimension has two indicators: school attendance; and years of schooling. The health dimension includes three indicators: nutrition; child mortality; and early pregnancy combined with female genital mutilation. The nine indicators of living standards are: access to electricity; adequate sanitation; safe drinking water; clean cooking fuel; having a suitable floor and roof; no overcrowding; and minimum assets of information, mobility and livelihood.

Each of these indicators has two associated deprivation cut-offs. One reflects deprivation under the acute poverty definition, which is similar (but not identical) to the global MPI; and the other, a higher cut-off denoting a slightly higher standard, required to measure (moderate) poverty that is inclusive of acute poverty.

For example, for acute poverty, the deprivation threshold for the indicator of years of schooling is set such as a household is considered to be deprived if none of its members have completed primary education. For poverty, the deprivation threshold considers a household to be deprived when none of its members completed secondary education.

For the indicators on child mortality, electricity and sanitation, the deprivation threshold for acute poverty and poverty are the same. It should be kept in mind therefore that although the definition of ‘moderate poverty’ thresholds for the indicators captures more moderate forms of deprivations than the global MPI, these are still based on serious shortcomings in terms of basic needs for survival. These might include not having access to drinking water within the dwelling or yard, or having more than three people sharing a room.

After defining deprivation status for a household under each of the indicators using the acute poverty or poverty thresholds, weights are assigned to these indicators. A deprivation score for the household is obtained by adding the weights of the different indicators in which the household is deprived. Following the global MPI, the weights are distributed equally among the three dimensions and equally among indicators within the same dimension.

The final step is to identify whether a household is multidimensionally poor (or acute poor) and this consists of comparing the household deprivation score (that is, the weighted sum of the multiple deprivations that a household is suffering) to the poverty cut-off that is a household being deprived in at least one third (33.3%) of the poverty indicators. This cut-off is the same for acute poverty and poverty.

The richness of the analysis here is manifested in the ability to examine the distribution of households by the intensity of deprivation. This made it possible for the report to look not only at the poor (those deprived in one third or more) but also to analyse vulnerable households – those whose deprivation score is between 20% and 33.3% – as well as to identify households that suffer high intensity of poverty and whose deprivation score is 50% or more (Alkire et al, 2016).

For its household poverty analysis, the report is based on data from ten Arab countries, which account for 75% of the region’s population. The available household surveys (the Demographic and Health Survey, the Multiple Indicators Cluster Survey and the Pan Arab Project for Family Health Survey) cover the period from 2011 to 2014 and offer indicators on education, health and living standards.

The child poverty analysis covered 11 countries (Palestine was added) and was based on a different measure (‘multiple overlapping deprivation analysis’) developed and applied by UNICEF to capture child deprivation depending on their age group.

Three main findings from the report should serve as the basis for policy action:

Multidimensional poverty is widespread in the region

Multidimensional poverty affects more than four in ten households (out of a population of nearly 120 million). When using the stricter definition of poverty, 13.4% of households are classified as acutely poor. Furthermore, one quarter of all households are vulnerable to poverty. This means that more than two thirds of the population are either poor or vulnerable to poverty.

Middle-income countries may have lower average incidence of poverty but a larger share of their population are vulnerable to poverty. But there is large variation between middle-income countries. In Algeria, Jordan and Tunisia, extreme poverty is very low, affecting less than 1% of the population, and it rises to 3% in Egypt. But moderate poverty in these countries is much more visible and affects one quarter of the population. For Iraq and Morocco, however, the incidence of extreme poverty is much higher (8%) and the total poor population is close to the regional average at 40%.

This is strong evidence that multidimensional poverty is a concern for all countries, not only the least developed countries. The least developed countries are in a more challenging situation since they carry a triple burden of acute poverty (49%), poverty (23%) and vulnerability (16%).

The poor in the least developed countries are also ‘severely poor’ as they suffer from high poverty intensity, experiencing deprivation across a larger number of indicators. For example, half of the population of Comoros, Mauritania, Sudan and Yemen suffer simultaneous deprivations in over 50% of the indicators.

Deprivation in education emerges as the primary source of multidimensional poverty in all countries

A staggeringly high share of households either do not have any member who has completed secondary school education and/or they have children who are below the grade level for their age. In Algeria, Iraq, Jordan, Tunisia and Morocco, this indicator alone contributes 25-30% to the total MPI. The contribution of the living conditions dimension (housing conditions and asset ownership) for the least developed countries is much higher and nearly equivalent to that of education.

Inequalities both between and within countries are much higher than expected

The poverty differences between countries are the most striking. In Jordan, only one out of ten households are poor. In Mauritania, the opposite is the case: nine out of the ten are poor. Not surprisingly, the poorest governorate in Egypt, Iraq or Tunisia is still by a stretch far better than the least deprived governorate in Sudan or Yemen.

Moreover, inequalities between the lowest and highest wealth quintiles are staggering. For the region as a whole, households in the bottom wealth quintile are 50 times more likely to be acutely poor than households in the highest wealth quintile.

An important caveat regarding these results is that the situation has changed considerably for some countries since 2014. Conflicts and economic recession have affected a number of the countries. This would suggest that if this study were to be updated using 2017 household surveys (which unfortunately is not an option), the headcount poverty rates and intensity of poverty are likely to increase.

For example, in Yemen, the already high poverty rate we report is based on the Demographic and Health Survey conducted in 2013, and its results do not reflect the country’s current state of poverty. Recent reports by the Food and Agricultural Organization and the World Food Programme reveal that education, health and particularly food insecurity in Yemen have deteriorated significantly and especially for children as a result of the conflict.

Syria and Somalia, which were not included in the report, also face major poverty challenges. Their inclusion would have worsened the regional average.

In short, there are two main policy conclusions: The results challenge the conventional wisdom (promoted by the extreme money metric poverty yardstick of US$1.90 a day) that extreme poverty is rare and moderate poverty is low in the Arab region. Poverty and inequality are serious in all ten countries. But the real challenge for middle-income countries is to deal with vulnerability. For the least developed countries, the urgent need is to alleviate extreme poverty.

What can be done to reduce multidimensional poverty?

The first priority for regional/global action is to target the poorest of the poor

This is not difficult since 14 of the 15 poorest regions are located in just two countries: Sudan (9) and Mauritania (5). Many of these are previous conflict zones and/or in rural areas. The poorest state in the Arab region is Central Darfur in Sudan, an area suffering from recurring conflicts and hosting many internally displaced persons. In this area, 80% of the population is extremely poor and over 90% is poor.

The numbers are broadly similar for the 14 other regions. Since this is a situation of mass extreme poverty, a geographically targeted universal poverty reduction programme can have a major impact on basic nutrition, health and schooling indicators.

Given the scale and depth of extreme poverty, we argue that these development programmes should also be coupled with a universal cash transfer. If we assume this would entail a transfer equivalent to US$0.95 per day per poor person, which is only half of the international extreme poverty line, the annual cost for covering Central Darfur would be around US$425 million (in current prices). This would go a long way to bringing 2.5 million people out of extreme poverty.

For the middle-income countries, reducing multidimensional poverty and vulnerability means first addressing gaps in education

All countries must also explore policy options to ensure that every child enrols and stays in school to obtain the full course of compulsory education. Middle-income countries can also do much better in designing their social protection systems to make their targeted interventions more effective in reaching the poor.

How to do that is a subject that has already been exhaustively debated. The main policy-relevant conclusion is that education in middle-income countries such as Morocco and Egypt needs both more and better public spending.

This is also one of the main messages of the recent ESCWA report (2017). The good news is that there are ways to secure fiscal space for financing education expenditure, most notably by using the potential increase in revenues through making taxation systems fair and progressive.

Further reading

Abu-Ismail, Khalid, Heba El Laithy, Dina Aramnious, Maya Ramadan and Marwan Khawaja (2015) ‘Multidimensional Poverty Index for Middle Income Countries: Findings from Jordan, Iraq and Morocco’, Technical paper, United Nations.

Alkire, Sabina, Christoph Jindra, Gisela Robles and Ana Vaz (2016) ‘Multidimensional Poverty Index – Summer 2016. Brief Methodological Note and Results’, OPHI Briefing No. 42, University of Oxford.

ESCWA (2017) ‘Rethinking Fiscal Policy In Arab Countries’.

League of Arab States, ESCWA, OPHI and UNICEF (2017) ‘Arab Multidimensional Poverty Report’.

Most read

Why the West got rich and the Middle East did not

Today’s rulers of the three largest Middle Eastern economies all look to religious authorities as a key source of legitimacy. Drawing on a broad sweep of historical analysis, this column explores what this might mean for the region’s economic future. One notable danger is that the types of people who would push for policies that promote long-run growth are excluded from the political bargaining table.

Why Turkish growth ended

Following a period of rapid economic growth, the Turkish economy has slowed significantly since 2007. This column argues that these economic ups and downs reflect institutional improvements in the aftermath of the country’s 2001 financial crisis, followed by an ominous slide in the quality of these economic and political institutions.

Implications of the current low oil prices for MENA countries

The current low oil price environment, in part driven by the US shale oil revolution, has important macroeconomic implications for the Middle East and North Africa (MENA). This column reports research evidence on its likely impact on both oil-exporting and oil-importing countries in the region.

Prospects for development with democracy in the Arab world

What are the prospects for democracy in the Arab world? This column expresses the hope that as conflict-afflicted countries embark on their programmes of economic reconstruction, autocratic institutions will not be re-established under the pretext of the need for a speedy and steady recovery. The optimal path of development necessarily includes robust growth, equity as well as democracy.

An agenda for reducing income inequality in the Arab countries

What can be done to reduce income inequality in Arab countries? This column explores issues of measurement as well as potential policy measures. It concludes by calling for a new multipurpose pan-Arab survey that would allow for an evidence-based decision-making process on the impact of proposed policies on poverty and inequality.

The United Arab Emirates’ dilemma

As energy-producing economies strive to reduce their reliance on oil revenues, they must strike a balance between the competing demands of fiscal sustainability and steady growth of the non-energy sector. This column outlines how the United Arab Emirates is addressing this challenge.

Freedom for women is crucial for economic progress in MENA

The Middle East was once the cradle of civilisation: can it prosper once again? Looking back at lessons from the European Enlightenment, this column argues that if the region wants to advance economically, it needs to advance in terms of its treatment of women. Female agency is central to understanding the West’s technological leadership of the past two centuries.

Inequality in higher education: Egypt, Jordan and Tunisia

Attainment of higher education is strikingly unequal in Egypt and Tunisia, and a little less so in Jordan. This column reports research showing that in all three countries, family background is the primary driver of inequality. Particularly in Egypt and Tunisia, public spending on higher education is regressive, with the result that what purports to be a meritocratic and equitable system in reality perpetuates inequality.

Oil exporters’ responses to the US fracking boom

What are the implications of low oil prices for the economic and political stability of Arab oil-exporting countries such as Saudi Arabia? This column explores the impact of the US fracking boom on Arab oil revenues – and how policy-makers in these countries should respond.

Pension reform that avoids harming MENA labour markets

To tackle the deficits in their pension systems, should governments in Arab countries raise social security contributions, reduce pension levels or increase the statutory retirement age? This column summarises the results of research assessing the costs and benefits of different pension reforms in terms of their impact on different generations and on the labour market.