Policy Implications

Knowing the number of people who actually move out of poverty is helpful for any policy initiative. However, it is the variation among the different income groups that informs the entire policy process, and can most effectively assist in designing programs that seek to permanently alleviate poverty. This information can also highlight which groups need special attention, and provide guidance on what kind of assistance may be most appropriate.

As Table 5 [ PDF 114.4KB | 1 page ] shows, different income groups exhibit varying levels of sensitivity to changes in income. For instance, Cambodia's non-agricultural workers and Lao PDR's rural diversified workers earning US$1/day or less show the highest sensitivity to income changes. This is to be expected, as these groups are often made up of casual and/or seasonal workers. Policies aimed at permanent reductions in poverty may be directed at providing more stable market conditions to create more permanent work opportunities. In contrast, and not surprisingly, all groups receiving transfer payments have the least sensitivity to income changes, showing that there has been an historical reliance on this source of income. It also implies that, given the recent decline in remittances, households that rely heavily on transfer payments may experience greater perceptions of hardship, if they lose this dependable flow of funds; moving this particular group out of poverty may not be easy.

Looking across these groups (US$1/day versus US$2/day) it is the rural workers in Lao PDR and the agricultural workers in Cambodia that experience the largest changes. In Lao PDR, for instance, for every 1% increase in income at the US$1/day level, there is a 0.62% decline in the number of rural laborers in poverty. However, at US$2/day, the number is almost half that amount, at 0.34%. Thus, policies that impact on the income of the very poor may be more effective for rural laborers in terms of absolute numbers moved out of poverty than, say, for non-agriculture workers. The number of rural laborers at the US$2/day level is going to be more difficult to change. This implies the need for long term support for this group, and a mechanism to provide for lasting change.

In Cambodia, the differences in elasticity across the US$1/day and US$2/day level are larger across the board, with rural workers in general (laborers and diversified) seeing the biggest difference. Thus, the impacts of changes in income between these two groups are more severe in Cambodia, implying the possibility of having a larger, more entrenched group of working poor.

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