Living income benchmarking of rural households in low-income countries

Abstract

The extreme poverty line is the most commonly used benchmark for poverty, set at US$ 1.90 by the World Bank. Another benchmark, based on the Anker living wage methodology, is the remuneration received for a standard work week necessary for a worker to meet his/her family’s basic needs in a particular place. The living wage concept has been used extensively to address incomes of plantation workers producing agricultural commodities for international markets. More recently intense discussion has emerged concerning the ‘living income’ of smallholder farmers who produce commodities for international supply chains on their own land. In this article we propose a simple method that can be used in all types of development projects to benchmark a rural ‘living income’. We launch the Living Income Methodology, as adapted from the Living Wage Methodology, to estimate the living income for rural households. In any given location this requires about one week of fieldwork. We express it per adult equivalent per day (AE/day) and data collection is focused on rural households and their immediate surroundings. Our three case studies showed that in 2017 in Lushoto District, rural Tanzania, the living income was US$ PPP 4.04/AE/day, in Isingiro District, rural Uganda, 3.82 and in Sidama Zone, rural Ethiopia, 3.60. In all cases, the extreme poverty line of US$ PPP 1.90 per capita per day is insufficient to meet the basic human rights for a decent living in low-income countries. The Living Income Methodology provides a transparent local benchmark that can be used to assess development opportunities of rural households, by employers in rural areas, including farmers hiring in labour, while respecting basic human rights on a decent living. It can be used to reflect on progress of rural households in low-income countries on their aspired path out of poverty. It further provides a meaningful benchmark to measure progress on Sustainable Development Goal 1, eliminating poverty, and 2, zero hunger and sustainable food systems, allowing for consideration of the local context.

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“…Tyszler et al (2018a,b) chose to differentiate by using three contrasting reference households to establish different Living Income benchmarks and then compared each household to the most similar reference household. Van De Ven et al (2020) recommend standardization of incomes using equivalence scales to account for the varying needs of household members in terms of food and income. Insufficient information was available from all of the surveys to allow this, but we conducted an exercise with the KIT data to explore the effect of using the adult equivalent (AE) for income (see Supplementary Figure 1).…”

“…We were not able to include the contribution of food crops grown for household consumption or other sources of in-kind income to meet household needs in our analysis of household income. This is a shortcoming, given that food cost may comprise about half of household expenditure in less-developed countries when assuming all food is purchased (Donkoh et al, 2014;CIRES, 2018;Smith and Sarpong, 2018;Van De Ven et al, 2020). Such information is difficult to collect given the detail required, but excluding it may lead to a substantial underestimation of income for some households.…”

“…To allow a more accurate comparison of households of different compositions to the Living Income benchmark, Van De Ven et al (2020) suggest that the Living Income benchmark should be expressed on an AE basis. We found little difference in the number of households obtaining a Living Income when we recalculate the income data and the Living Income benchmark to income per AE rather than per person (Supplementary Material 2).…”

“…Elements of a decent standard of living include: food, water, housing, education, healthcare, transport, clothing, and other essential needs including provision for unexpected events" (Living Income Community of Practice, 2020). A Living Income thus addresses the basic human rights to food, shelter, housing, and education (Van De Ven et al, 2020). The Living Income benchmark for a specific country or region generally lies above the national or global poverty lines, as more items are considered to be required for a decent standard of living than what is usually included in the "consumption basket" used to calculate the poverty lines (Van De Ven et al, 2020).…”

“…A Living Income thus addresses the basic human rights to food, shelter, housing, and education (Van De Ven et al, 2020). The Living Income benchmark for a specific country or region generally lies above the national or global poverty lines, as more items are considered to be required for a decent standard of living than what is usually included in the "consumption basket" used to calculate the poverty lines (Van De Ven et al, 2020).…”