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10.1.1 Growth Rates of Household Expenditure or Income Per Capita Among the Bottom 40 Percent of the Population

Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average

Goal 10: Reduce inequality within and among countries

Custodian Organization: World Bank (WB)

Tier Classification: Tier II

To facilitate the implementation of the global indicator framework, all indicators are classified by the IAEG-SDGs (Inter-Agency and Expert Group on Sustainable Development Goals Indicators) into three tiers on the basis of their level of methodological development and the availability of data at the global level, as follows:

Tier I: Indicator is conceptually clear, has an internationally established methodology and standards are available, and data are regularly produced by countries for at least 50 per cent of countries and of the population in every region where the indicator is relevant.

Tier II: Indicator is conceptually clear, has an internationally established methodology and standards are available, but data are not regularly produced by countries.

Tier III: No internationally established methodology or standards are yet available for the indicator, but methodology/standards are being (or will be) developed or tested.

Source: United Nations Statistics Division

Definition: The growth rate in the welfare aggregate of bottom 40% is computed as the annualized average growth rate in per capita real consumption or income of the bottom 40% of the income distribution in a country from household surveys over a roughly 5-year period. The national average growth rate in the welfare aggregate is computed as the annualized average growth rate in per capita real consumption or income of the total population in a country from household surveys over a roughly 5-year period.

Concepts: Promoting shared prosperity is defined as fostering income growth of the bottom 40 percent of the welfare distribution in every country and is measured by calculating the annualized growth of mean per capita real income or consumption of the bottom 40 percent. The choice of the bottom 40 percent as the target population is one of practical compromise. The bottom 40 percent differs across countries depending on the welfare distribution, and it can change over time within a country. Because boosting shared prosperity is a country-specific goal, there is no numerical target defined globally.

Rationale: Improvements in shared prosperity require both a growing economy and a consideration of equity. Shared prosperity explicitly recognizes that while growth is necessary for improving economic welfare in a society, progress is measured by how those gains are shared with its poorest members. Moreover, in an inclusive society it is not sufficient to raise everyone above an absolute minimum standard of living; it must ensure that economic growth increases prosperity among the poor over time.

The decision to measure shared prosperity based on income or consumption was not taken to ignore the many other dimensions of welfare. It is motivated by the need for an indicator that is easy to understand, communicate, and measure—though measurement challenges exist. Indeed, shared prosperity comprises many dimensions of well-being of the less well-off, and when analyzing shared prosperity in the context of a country, it is important to consider a wide range of indicators of welfare.

Limitations:There are mainly two limitations of shared prosperity indicators: data availability and data quality.

Lack of household survey data is even more problematic for monitoring shared prosperity than for monitoring poverty. To monitor shared prosperity, two surveys of a country have to be conducted within five years or so during a chosen period, namely circa 2007-12. They have to be reasonably comparable to each other in terms of both the survey design and the construction of the welfare aggregates. Thus, not every survey that can generate poverty estimates can generate shared prosperity estimates.

The second consideration is the coverage of countries, with data that are as recent as possible. Since shared prosperity must be estimated and used at the country level, there are good reasons for obtaining a wide coverage of countries, regardless of the size of their population. Moreover, for policy purposes it is important to have indicators for the most recent period possible for each country. The selection of survey years and countries needs to be made consistently and transparently, achieving a balance between matching the time period as closely as possible across all countries, including the most recent data, and ensuring the widest possible coverage of countries, across regions and income levels. In practice, this means that time periods will not match perfectly across countries. This is a compromise: while it introduces a degree of incomparability, it also creates a database that includes a larger set of countries than would be otherwise possible.

Data quality: Like for poverty rates, estimates of annualized growth of mean per capita real income or consumption are based on income or consumption data collected in household surveys. The same quality issues applying to poverty rates apply here. Specifically, measuring household living standards has its own complications. Surveys ask detailed questions on sources of income and how it was spent, which must be carefully recorded by trained personnel. Income is difficult to measure accurately, and consumption comes closer to the notion of living standards. Moreover, income can vary over time even if living standards do not. But consumption data are not always available: the latest estimates reported here use consumption for about two-thirds of countries.

Similar surveys may not be strictly comparable because of differences in timing, sampling frames, or the quality and training of enumerators. Comparisons of countries at different levels of development also pose problems because of differences in the relative importance of the consumption of non-market goods. The local market value of all consumption in kind (including own production, particularly important in underdeveloped rural economies) should be included in total consumption expenditure, but in practice are often not. Most survey data now include valuations for consumption or income from own production, but valuation methods vary.

The statistics reported here are based on consumption data or, when unavailable, on income data. Analysis of some 20 countries for which both consumption and income data were available from the same surveys found income to yield a higher mean than consumption but also higher inequality. When poverty measures based on consumption and income were compared, the two effects roughly cancelled each other out: there was no significant statistical difference.

Invariably some sampled households do not participate in surveys because they refuse to do so or because nobody is at home during the interview visit. This is referred to as “unit non-response” and is distinct from “item non-response,” which occurs when some of the sampled respondents participate but refuse to answer certain questions, such as those pertaining to income or consumption. To the extent that survey non-response is random, there is no concern regarding biases in survey-based inferences; the sample will still be representative of the population. However, households with different incomes may not be equally likely to respond. Richer households may be less likely to participate because of the high opportunity cost of their time or because of privacy concerns. It is conceivable that the poorest can likewise be underrepresented; some are homeless or nomadic and hard to reach in standard household survey designs, and some may be physically or socially isolated and thus less likely to be interviewed. This can bias both poverty and inequality measurement if not corrected for.

Source: United Nations Statistics Division

Data Source: Data for this indicator was primarily collected from the United Nations Statistics Division’s Open SDG Data Hub. National level data from the UN Statistics Division is compiled by the respective custodian for the SDG indicator, unless otherwise noted. To learn more about the data used in this portal, visit the about page.

Data is accurate as of October 31, 2018.

 
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10.1.1 Growth Rates of Household Expenditure or Income Per Capita Among the Bottom 40 Percent of the Population in the Sustainable Development Goals

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10. Reduce inequality within and among countries
10. Reduce inequality within and among countries

10. Reduce inequality within and among countries

The international community has made significant strides towards lifting people out of poverty. The most vulnerable nations – the least developed countries, the landlocked developing countries and the small island developing states – continue to make inroads into poverty reduction. However, inequality still persists and large disparities remain in access to health and education services and other assets.

Additionally, while income inequality between countries may have been reduced, inequality within countries has risen. There is growing consensus that economic growth is not sufficient to reduce poverty if it is not inclusive and if it does not involve the three dimensions of sustainable development – economic, social and environmental.

To reduce inequality, policies should be universal in principle paying attention to the needs of disadvantaged and marginalized populations.

Related 10.1.1 Growth Rates of Household Expenditure or Income Per Capita Among the Bottom 40 Percent of the Population Targets

10.1

By 2030, progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average