Multidimensional poverty risk of vulnerable households in Indonesia
Since transition, there has been divergence between economic and human development in each region in Indonesia, which gives rise to question whether the use of a multidimensional approach instead of a financial assessment of poverty leads to a different identification of vulnerable socio-demographic groups. Moreover, every province of Indonesia is very diverse, which suggests that the relation between socio-demographic household characteristics might vary between different regions in the country.
Ellis (2000) developed a theory which is based on the capabilities approach as developed by Sen in 1983. This approach to assess human well-being evolved from the basic needs approach, and rejects the use of an objective financial cut-off for poverty, and a focus on only physical assets and the utility gained by individuals. The focus of the capability approach is on the ability to act and views commodities as means, not as ends to achieve a certain standard of well-being. The livelihood framework distinguishes assets, access, and activities, which together determine the living gained by an individual or household. Another alternative approach to measure well-being is by using subjective well-being or life satisfaction, which originates on the work of Easterlin (1974) who linked psychology to economics. Subjective well-being is also viewed as an household asset, and is with other (more objective) indicators of household capabilities integrated in a multidimensional well-being index.
The construction of the multicomponent index is based on earlier work of Klasen (2000) and Guio (2005). Research of the World Bank (2000, 2005) showed that well-being problems in Indonesia are mainly linked to housing and (semi-)public services, such as health care, education, and utilities. Moreover, studies by a.o. Bezemer (2006) and the World Bank (2005) show that women, children, elderly, and households in rural areas are vulnerable groups in Indonesia. Other research by the World Bank (2006) adds that there is a concentration of deprivation in secondary cities. Moreover, vulnerable households tend to be trapped in bad general living conditions with restricted access to improvements in their well-being situation. Further, some sociological case studies by Smith et al. (2006, 2008) and Stenning et al. (2007) show that low welfare is strongly connected with low skill, bad health, unemployment, and old age in poor areas. Moreover, Smith (2000, 2003) finds that regional welfare is strongly connected with industrial activity and high skill levels.
Financial poverty is defined as an inadequate level of income to satisfy basic material needs. Multidimensional poverty (or deprivation) is defined as an insufficient level of capabilities to meet basic needs. For both poverty and deprivation, a 40% and 20% cut-off point is used to compare the vulnerability of households based on both measurements of well-being.
Kompas stated that for many households financial poverty and deprivation do not overlap necessarily. With a lower poverty line, the overlap between the two different poverty types is even smaller (relatively). The relation between poverty and deprivation ranks of households is also quite weak. This is in particular the case for the worst-off households in Indonesia.
Besides the obvious differences in poverty and deprivation rates between the regions, the differences between the poverty rate and the deprivation rate in each region is surprising. The ‘richer’ regions have a relatively high deprivation rate, while the poorest regions experience a deprivation rate that is low in relation to their financial poverty rate.