Human Poverty Index

WHILE PER CAPITA INCOME is the most commonly used and most widely accepted measure of a country's economic achievement, it has long been recognized that composite measures of economic progress might better reflect a country's true level of development. Composite measures combine a variety of quality-of-life [Page 512]variables into a single statistic. While a variety of composite measures exist, probably the most well-known of these statistics is the Human Development Index (HDI), which has been calculated and published by the United Nations Development Program (UNDP) annually since 1990. The HDI is designed to measure human development, defined as the ability “to lead a long, healthy life, to acquire knowledge, and to have access to the resources needed for a decent standard of living.” Through a complex formula, the HDI combines a country's Gross Domestic Product (GDP) per capita adjusted for purchasing power, literacy rate, mean years of schooling, and life expectancy into a single statistic ranging numerically from 0 to 1.

While income, educational attainment, and life expectancy are generally closely correlated, the relationship is not exact and many examples exist of relatively poor countries having well-educated populations with long life spans and of rich countries with poor levels of achievement in these areas. For example in 2002, South Africa had an average life expectancy nearly 20 years lower than Vietnam's as well as a lower literacy rate despite a per capita income over four times higher.

In 1997, the UNDP began to publish a similar composite statistic related directly to poverty, known as the Human Poverty Index (HPI). While the HDI measures a country's progress toward a high standard of living, educational attainment, and longevity, the HPI measures a country's level of deprivation of these variables. Composite measures of poverty are known as deprivation Indexes, among which the HPI is probably the most widely recognized. As is the case with the HDI, the HPI provides a broader measure of the overall level of poverty in a country by focusing on statistics beyond simply income.

The UNDP calculates the HPI differently for developing countries and high-income nations. The Human Poverty Index for rich countries, known as the HPI-2, is the weighted average of four variables: the percentage of the population not surviving to age 60, the level of functional illiteracy among adults in the country, the percentage of people living below the income poverty line defined as 50 percent of the median-adjusted disposable household income, and the rate of long-term unemployment exceeding one year in duration.

The Human Poverty Index for developing countries, HPI-1, is the weighted average of three variables: the probability of a person not surviving to age 40, the adult illiteracy rate, and the combined percentage of the population without access to safe water and the prevalence of underweight children. Both the HPI-1 and HPI2 are weighted in such a manner as to place a greater emphasis on the components in which there is the highest level of deprivation.

Because of the nature of the variables used in estimating the HDI and HPI, as well as the calculation procedures, there are generally only small differences in the numeric values of the HDI for rich countries, while the values of the HPI can vary widely. For example, in 2002 while less than one-hundredth of a point separated the HDIs of Sweden and the United States, the HPI-2 for Sweden was 6.5 percent compared with a figure of 15.8 percent in the United States. As a rough interpretation this means that an American was about two-and-a-half times more likely than a Swede to suffer from one of the four deprivations measured by the HPI-2.

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