Feb 20, 2007

How the Poor Live

by Laura Starita

A recent study undertaken by scholars at Massachusetts Institute of Technology’s Poverty Action Lab provides interesting insights into how the world’s poor and extremely poor earn and spend their money. The study looks at surveys conducted in 13 countries, including nations in Africa, Asia and Latin America, and measures poverty by per capita consumption. The report has plenty of surprising information.

Contrary to the view of the poor as disempowered, the study found they exercise a degree of choice when it comes to the ways in which they spend their money. They don’t, for example, spend every penny possible on food, and not all the foods they buy are the most calorie rich for the cost. Treats such as rice, coffee, tea and sugar, alcohol and tobacco account for surpisingly large portions of their budgets. While few have access to formal financial institutions in the Western sense, in most areas, more than half of respondents say they have used credit. In Pakistan, the figure is more than 90%. The vast majority of poor children are enrolled in school (they are only taken out when a financial crisis hits), and more poor parents indicate a willingness to spend on private school fees for their children if the quality of the education at the local government school is poor (though poor parents have a hard time gauging this, as they are often undereducated themselves).

The study is a rare example of looking at the behaviors and needs of the poor with data rather than conjecture. All philanthropic investment would benefit by being grounded in such data.

MIT Poverty Action Lab: The Economic Lives of the Poor