Household Budget Surveys: A Deeper Analysis

Progressive Politics

By R. Chand

In these very columns, reference was made by the Director of Communication of the Labour Party to the different Household budget surveys (HBS) that are carried out every five years to show that the Labour Party has retained its core progressive ideology.

The main conclusion that was drawn was that it was only during the period 1996-2001 that the lowest strata of society, the poorest households, benefited from the “highest” increase in income over the period. The HBS figures indeed confirm that, with a Labour-led government during the period 1996-2001, the percentage of total income going to the poorest households improved while the share of the richest households experienced a decrease (see Table 1).

 Table 1: Share of total income

 

This is also reflected in the GINI coefficient. (The GINI coefficient is a measure of the inequality of a distribution, a value of 0 expressing total equality and a value of 1 maximal inequality). The distribution of income, as measured by the GINI coefficient, improved over the period 1980/81 to 1991/92 and then deteriorated from 0.379 in 1991/92 to 0.387 in 1996/97 and in 2001/02 recorded an improvement to 0.371 (Table 2).

 

Table 2: The GINI coefficient

	1980/81	1986/87	1991/92	1996/97	2001/02	2006/07
GINI coefficient	0.445	0.396	0.379	0.387	0.371	0.388

 

The Poverty Analysis of 2001/02 also notes a decrease in the proportion of households or persons below the poverty line. The proportion of poor households declined from 8.7% to 7.7%; that of poor persons declined from 8.2% to 7.8%. On the other hand, the Poverty Analysis of 2006/07 indicates that the proportion of the poor households increased from 7.7 % to 7.9%; the proportion of poor persons rose from 7.8% to 8.5%.

So far the facts corroborate the arguments of the Labour Party’s Director of Communication that the non-toxic period 2001-2006 saw the committed application of genuine progressive policies that benefited everyone except the richest households. But a deeper analysis of the HBSs reveals that there is nothing exceptional with the 1996-2001 period and that the story lines do turn out to be different.

 

Table 3: Average household monthly consumption expenditure

	1986/87	1991/92	1996/97	2001/02	2006/07
Poor households (Rs)	1266	2068	3068	4077	5425
–Real increase (%)		8	3	0	-1
All households (Rs)	3035	5225	7846	11390	15188
–Real increase (%)		14	4	9	-1

 

Over the different HBSs, the consumption options of the Mauritian households have indeed widened. Average household monthly expenditure did register marked real increases for all households but the most significant real increase in the monthly expenditure of poorer households occurred during the periods 1986/87 to 1991/92 and 1991/92 to 1996/97. These expenditures however do not include imputed values for free government services consumed.

 

Table 4: Average monthly household income

	1980/81	1986/87	1991/92	1996/97	2001/02	2006/07
Poor households(Rs)	750	1200	2150	3668	5078	7055
–Real increase (%)		24	18	12	9	4
All households(Rs)	2212	3496	6503	10179	14232	19083
–Real increase (%)		22	23	8	5	0

 

Income is also an important means of widening the range of consumption options. The HBSs show a significant movement up the income ladder. The average monthly household income has gone up significantly in nominal terms to reach around Rs 19,000 by 2006/07. After adjusting for price increases, we note a pronounced increase in the purchasing power of the average household during the 15-year period 1981 to 1997 which demarcates itself as most beneficial period for both poor and all households. There were gains for all classes even for the richest 10% but the poorer households were able to capture a major share of the gains –the benefits of the high growth rates of this period percolating down to the downtrodden.

As both income as well as the poverty line change over time, a more relevant measure is the Income Gap Ratio (IGR), which provides a better measure of the depth of poverty among the poor. From 1996/97 to 2001/02, the IGR increased from 21.0% to 22.6 indicating that the situation of the poor has deteriorated slightly during that period whereas from 2001/02 to 2006/07, the ICR decreased slightly from 22.6% to 21.9 showing that the situation of the poor has improved marginally. We also seem to have “the absolute reverse results”!

For a more meaningful comparison of the extent of the progressive policies carried out by respective regimes, the proportion of expenditure spent on social welfare programmes – free education, free health services, low interest housing loans, free bus transport, social security benefits such as basic pensions, social aid, etc., – would have been better indicators of government’s efforts at promoting the well-being of the population and impacting on absolute and relative poverty. For example in the Poverty analysis 2006/07, it is pointed out that “if public transfers were not granted, the proportion of poor households would be 15.9% instead of 7.9%; households which would be highly affected are mainly households with elderly (poverty rate would be 28.2% instead of 6.6%) and female one parent households with unmarried children only (poverty rate would be 32.6% instead of 14.0%).”

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* Published in print edition on 25 February 2011

Tags:Budget Surveys, GINI, Income Gap Ratio, Labour Party, R. Chand