DEPARTMENT OF ECONOMICS CONFERENCE ON THE ECONOMY (COTE) October 8th – 9th 2008 INCOME POVERTY AND STATE SUPPORT IN TRINIDAD AND TOBAGO: THE CASE FOR ALIGNMENT Karl Theodore and Ewan Scott   Labour Market and Poverty Studies Unit Department of Economics UWI October 9, 2008

OBJECTIVE The primary objective is threefold. First we would like to determine whether the poverty situation in Trinidad and Tobago has trended upwards or downwards since it was last officially measured in 2005. Second we would like to determine the extent of the support given to low income households by the state. Finally, putting the two sets of results together, we will open the case for developing a new poverty measure for Trinidad and Tobago.

CONTEXT The buoyancy of the economy is without question: per capita real income doubling between 1998 and 2008 (99.6%) Continuation of an upward trend for past decade is prima facie evidence that generally living conditions in the country are improving. Evidence from other places shows that even when average incomes are increasing there might be no change whatsoever in the poverty rate Same for T&T?

Quotable quotes For the USA we read that ”the inflation-adjusted incomes of median households rose by 1.3% in 2007 from the previous year, from $49,568 in 2006 to $50,233 in 2007 (2007 dollars), while the overall poverty rate increased slightly, from 12.3% to 12.5%.” Jared Bernstein(2008) For New York City in particular, it was found that “median income rose slightly from 2005 to 2006, but the number of people living in poverty also increased. The poverty rate remained stubbornly resistant at about one person in five…” Sam Roberts, New York Times, August 28, 2007, 

Study Approach Poverty estimates for Trinidad and Tobago have traditionally come from the Household Budget Surveys (HBS) done by the CSO or, more recently, on Surveys of Living Conditions (SLC). Since up-to-date HBS data are not available and since the last SLC was done in 2005, the attempt to determine poverty trend since 2005 will be based on the CSSP data produced by the CSO. Thanks to CSO for providing us with the datasets which made the poverty estimation possible.

LIMITATIONS There are at least five sources of overestimation of poverty levels using the CSSP data:   To the extent that some households may have no members employed and hence no employment income, at the outset such households will be categorized as poor. Income is thought to have a larger transitory component than consumption making it a less reliable indicator of welfare potential; Income sources are usually more diverse than consumption, highlighting the need for a wider range of survey questions, and making income a more difficult variable to measure; It is a widely accepted claim that incomes tend to be under-reported by respondents in a survey. In addition, there may be instances of non-reporting of employment income by members in some households thereby lowering the total income for such households.

METHODOLOGY Using the CSSP data, the procedure for arriving at an estimate of the poverty level for 2008 is necessarily different from that used in respect of the SLC data.  Given the absence of consumption expenditure data in the CSSP, and thus inability to compute Engel coefficients, computation of the poverty line is an adaptation. The 2008 poverty line was arrived at by inflating the 2005 SLC poverty line by the year-on-year changes in the CPI. By this procedure, the 2008 poverty line was found to be TT$815 per adult per month.   As a basis for comparison, CSSP poverty estimates were computed by applying the SLC 2005 poverty line of $665 to the 2005 CSSP data. A household was deemed to be poor if its per capita employment income in adult equivalence fell below the poverty line.

RESULTS Shown in the diagram are the two different sets of poverty estimates for Trinidad and Tobago over the period 1997 to 2008: CSSP in blue and SLC in red. The data are shown in the Table below.

Poverty estimates CSSP data (quarters, 2,3) CSSP Headcount Index % SLC Headcount Index 1997 29.25 24 2005 22.95 16.7 2008* 18.00 - For 2008 only first quarter data are available

COMMENT What we see in the diagram is that although the CSSP poverty estimate is consistently higher than the SLC estimate, as expected, the trend in both estimates is almost exactly the same between 1997 and 2005. In both cases poverty is shown to be falling at almost the same rate. We note that according to the CSSP, in the period 2005 to 2008 poverty fell at a faster rate than before. If the SLC estimate for 2008 follows the same pattern we will expect the 2008 SLC estimate, when it is produced, not only to be lower than its 2005 counterpart of 16.7% but also to show a speeding up in the decline of poverty.

STATE SUPPORT OF LOW INCOME HOUSEHOLDS In the Table below we present a summary of the monthly value of the support that is made available to the poorer households of the country. Since the data on some grants and subsidies were not available in a form to be readily converted into monthly values these grants and subsidies have been omitted. The figures presented are therefore underestimates of the true level of support. The information is presented on the basis of the composition of low-income households in the country. For present purposes we identify five household categories.  

Composition of Five 5-person Households (Selected from SLC Combinations) Household Type 1: 1 adult (unemployed) 4 children (2 primary; 2 secondary) Household Type 2: 1 adult (employed) 4 children (2 primary; 2 secondary, including 1 disabled) Household Type 3: 2 adults (employed) 3 children (2 primary; 1 secondary) Household Type 4: 3 adults (1 employed; 1 unemployed; 1 elderly) 2 children (1 primary; 1 secondary) Household Type 5: 4 adults (1 employed; 1 unemployed; 1 elderly; 1 disabled) 1 child (1 secondary)

MONEY VALUE OF BENEFITS (MONTHLY) FROM SELECTED SUPPORT INSTRUMENTS, BY SELECTED HOUSEHOLD COMBINATIONS (1) 2008 POVERTY LINE = $815 No. Support Instruments H/Hold 1 H/Hold 2 H/Hold 3 H/Hold 4 H/Hold 5 $0 0<$ 500 < $1,500 <$ 1,000 < $1,000 Selected Grants & Subsidies: 1. Education Grant 560 420 280 140 2. Textbook Rental/Loan 696 348 232 3. School Transportation 756 567 378 189 4. Schools Nutrition Prog. 1,304 652 326 5. CDAP 52.30 104.60 6. Food Debit Card 400 7. Old Age Pension / Senior Citizens’ Grant - 1,650

MONEY VALUE OF BENEFITS (MONTHLY) FROM SELECTED SUPPORT INSTRUMENTS, BY SELECTED HOUSEHOLD COMBINATIONS (2) 2008 POVERTY LINE = $815 Monthly Income ($TT) No. Support Instruments H/Hold 1 H/Hold 2 H/Hold 3 H/Hold 4 H/Hold 5 $0 $0< 500 <$ 1,500 < $1,000 Selected Grants & Subsidies: 8. Public Assistance Prog 650 - 9. Disability Assistance Pro 1,100 10. Fuel Subsidy 36 11. Type 1 benefit 800 Total monthly benefits ($TT) 5,254.3 6,354.3 3,623.3 5,298.6 5,575.3 ANNUAL TOTAL SUPPORT ($TT) 63,051.6 76,251.6 43,479.6 63,583.2 66,903.6

CONCLUDING COMMENT Three conclusions seem to be warranted: In spite of its upward bias the CSSP poverty estimate faithfully mirrors the downward trend in the SLC estimate The money value of available income support for low-income households vastly exceeds the poverty line Traditional poverty estimates which exclude the impact of the income support will tend to overstate the poverty levels in the country. The prima facie case for a new measure of poverty in T&T seems to be a strong one.