Paper short abstract:

We propose a key measure of multidimensional poverty operationalizing the Capability Approach to complement the consumption poverty measure. We examined data before and after the pandemic in Indonesia and found that women and children were more prone to experience multidimensional poverty and deprivations across several indicators, prompting the need for urgent policy action.

Paper long abstract:

Research Context

Indonesia has reduced its extreme poverty levels significantly across the last ten years, achieving 1% extreme consumption poor (1.90 USD PPP per day) in 2023. Ending poverty, is however, not just about people’s monetary achievements, but importantly also about access to basic amenities to enjoy a healthy and fulfilled life. If Indonesia’s measure of poverty is broadened to include indicators used within the global Multidimensional Index (global MPI), a measure of acute multidimensional poverty, in 2020, only 2.8 percent of Indonesia’s population is shown to be experiencing acute/extreme multidimensional poverty. Having eradicated nearly all extreme poverty, whether measured by the 1.90$/day or indicators within the global MPI, Indonesia can now turn to broadening its definition of poverty commensurate with its middle-income status and its target of achieving high income status in 2045. The focus of this new national level multidimensional poverty measure should not only be on monitoring progress in eliminating extreme poverty, however, should also evaluate achievements across the poor and those vulnerable to poverty, particularly as Indonesia aims to broaden the reach of its social protection programmes.

With this background in mind, this paper analyses results from a series of FGDs conducted in September to November 2023, hosted by the Fiscal Policy Agency, Ministry of Finance Republic of Indonesia and UNICEF Indonesia. These discussions brought together key stakeholders concerned with poverty alleviation in Indonesia, to choose relevant dimensions, indicators and weights needed to formulate a moderate multidimensional poverty measure for Indonesia. This measure specifically sought to include indicators that are sensitive to child and gender issues and aligned closely to Indonesia’s key development goals. We then applied results of these participatory exercises to National Socio-Economic (SUSENAS) survey data from 2019 and 2023. Our aim was to monitor changes in indicator level deprivation, MPI headcount and intensity, before and after the COVID-19 pandemic. We conducted disaggregations across urban-rural, province and sub-district areas, and importantly across gender and age, to examine whether the pandemic affected males and females differently and whether children’s deprivation patterns differed from those of adults.

Methodology and Key Preliminary Findings

Our research employed a mixed method approach and was divided into two general steps. The first step consisted of qualitative Focus Group Discussions (FGDs) conducted across two months in September to November 2023, including representatives of all key line ministries connected with poverty alleviation programmes in Indonesia (Ministry of Social Affairs, the Vice President’s Office on Accelerating Poverty Alleviation, Ministry of National Development Planning, Ministry of Health, Ministry of Education, Coordinating Ministry of Human Development and Culture, National Bureau of Statistics Indonesia and representatives of local governments). The purpose of these FGDs was to gather opinions on how best to measure moderate multidimensional poverty in Indonesia, i.e., which dimensions, indicators and weights should be included within such a measure. In addition to these FGDs, we also conducted online surveys across line ministries to gather opinions on indicator choices and appropriate thresholds to use to define deprivation within each indicator. Trend analysis was conducted to examine FGD results, which were then triangulated with key outcomes from the online questionnaires. This qualitative exercise resulted in the selection of four dimensions, i.e., Education, Health, Living Standards and Employment, along with 15 indicators used to proxy deprivation within each of these dimensions. Although the general framework of the measure followed that of the global MPI, significant changes were made regarding indicator cutoffs to reflect Indonesia’s key development goals. As an example, for Education, the cutoff for “School Attendance” was made more stringent, requiring that all children attend school until the age they complete high school. Additional gender and child specific indicators were also added, such as child marriage, child labour and access to birth control.

Within the second step of our research, we mapped chosen indicators, cutoffs, and weights, to data available within the National Socio-Economic Survey (SUSENAS). We employed the Alkire-Foster method to compute the M0, H (headcount) and A (intensity of poverty) for Indonesia. We analyzed results for 2019 (just before the Government officially announced the onset of the COVID-19 pandemic) and the most recent available dataset, i.e., 2023. We measured moderate MPI poverty trends before and after the pandemic, looking at reductions in both headcount and intensity of poverty. Susenas allows disaggregations up to the district level, which enabled us to examine which districts reduced poverty the most from 2019 to 2023. Importantly, we analyzed how moderate multidimensional poverty was experienced by women vs. men and children vs. adults. We found that women and children were more prone to experience moderate multidimensional poverty, highlighting the importance of gender and child inclusive policies. Although our indicators could only focus on access, zooming into education and health indicators confirmed the global recognition on learning loss and low access to healthcare. When data allows us to assess the quality of what is accessed, these deprivations can only get deeper.

Preliminary Conclusions and Policy Relevance

Following Sen’s Capability Approach, development should focus on more concrete matters not just monetary achievements, i.e., on whether societies and individuals within them are able to reach their full potential. Indonesia is currently at a cross roads, preparing to embrace a higher level of economic development. As Sen so poignantly notes, “Economic growth without investment in human development is unsustainable and unethical”. Our findings highlight the need to focus on multiple aspects of human development. Our proposed measure of moderate multidimensional poverty places individuals and households at the center of development strategies. Information on joint deprivations and disaggregations provides crucial evidence supporting fiscal and social-policy decision making processes within the Government of Indonesia.

Key words: Capability Approach, moderate multidimensional poverty, Indonesia