The classification of poor and rich seems to be an unavoidable reality in the social structure of society. However, the existence of this disparity does not reflect the absence of efforts to alleviate poverty. In fact, 149 countries in the world provided cash transfer programs in 2017 (World Bank, 2017). The issue of poverty is not only associated with income and economic growth. In a broader perspective, low socioeconomic status impacts all aspects of life, including health, education, resilience to shocks, and an individual's role in the labor market. For the government, attention to the problem of poverty is a must, because its impact involves the quality of human resources, which in turn affects the viability of all economic sectors in a country. However, while poverty alleviation continues to be a major concern for governments, especially in developing countries, the question still arises as to why poverty exists?
Policy perspective: Why can't poverty be eliminated despite many social assistance programs?
During the persistence of poverty, governments continue to provide social programs. In developing and transition countries, around 2.5 billion people are covered by safety net programs, with 650 million people coming from the poorest quintile in 2018 (World Bank, 2018). Nonetheless, a fundamental question arises: why is poverty still not alleviated? While central banks can use interest rate policies to achieve desired inflation rates, and the Covid-19 pandemic has been addressed through vaccinations, mask rules, medical aid, and lockdown measures, why is poverty still an intractable challenge? Why have these efforts not been fully successful in eradicating poverty?
Poverty is not an isolated challenge; its impact extends to many areas of life. Addressing poverty is a complex challenge because the government must direct its attention to various aspects. Furthermore, one of the challenges that the government and policymakers still face is identification and targeting. For example, in 2020, when the Covid-19 pandemic hit, only 25% of the total number of children worldwide were covered by social protection, while only 18.6% of those experiencing unemployment received unemployment benefits (ILO, 2020). This low coverage of social assistance reflects weaknesses in targeting, where groups that should be receiving assistance are not.
There are many methods that can be adopted in targeting, such as proxy means tests, self-selection, and so on. The government must implement a careful targeting strategy to ensure that the limited budget can be optimized and allocated to individuals and households that truly need assistance. However, determining beneficiaries is not a simple matter. The question that arises is whether the assistance will be given to poor households, or eligible households? This is a dilemma for policymakers who are faced with budget constraints.
One of the most efficient alternative approaches is to direct assistance programs to the poorest of the poor. With this scheme, the government strategically prioritizes programs for individuals who fall into the category of the poorest of the poor first, then gradually expands its coverage to the less poor. A clear example of the application of this policy design can be found in Indonesia, where the government established the National Team for the Acceleration of Poverty Reduction (TNP2K) to accelerate poverty reduction efforts with a special focus on extreme poverty. TNP2K established an integrated database (Basis Data Terpadu/BDT) that contains detailed data on poor households, enabling poverty identification using a micro approach. This integrated data is the basis for distributing assistance to the poorest households so that accuracy and efficiency can be better ensured.
While it is undeniable that data collection requires substantial budget allocations and considerable time, it should be recognized that data is a key element in policy formulation. Whether we realize it or not, data plays a central role in informing strategic decisions. Unfortunately, an understanding of the important role of data in the policy formation process has not always permeated evenly among government officials. As a result, data preparation is often constrained by a lack of comprehensive understanding and a holistic approach. It is important to note that the costs incurred due to poor data quality far exceed the costs incurred for data collection itself.
Challenges in the implementation of poverty alleviation programs are not limited to targeting issues. Another problem that arises is moral hazard. Moral hazard can be defined as a condition where beneficiaries, especially in the context of insurance, tend to take health risks or put aside healthy behaviors because they feel protected by the safety net that is already available. Identifying moral hazard is one of the keys to better policy design. By taking moral hazard into account, policymakers can preserve the benefits by lowering the risks that may occur.
One policy strategy that can reduce the potential for moral hazard is the Conditional Cash Transfer (CCT). This policy implements the provision of social assistance to recipients while ensuring that recipient households meet a set of specified conditions. These conditions are designed with the aim of ending the cycle of poverty and creating a long-term positive impact on the lives of beneficiary households. Such conditions may include the obligation for children to attend school, responsibility for mothers to make regular visits to health centers during pregnancy and the postpartum period, participation in job training, and so on.
Poverty in the eyes of the poor: Poverty is not a choice
In addition to examining this topic from the perspective of government policy, we need to understand the problem of poverty from the perspective of its subject: the poor. It is my hope that this section will change the way you look at poverty and empathize more with the poor.
Let's start this section by looking at a simple parable.
"Joseph woke up late and was late for school."
Let's determine if the above premium can be summarized with the sentence below,
"If Joseph is late for school, it's because he overslept."
Do the two sentences above have the same meaning? The answer is no. Joseph may be late because of traffic, because he forgot something and had to go back home, because there was a road closure on his way to school, or other reasons.
Unfortunately, this misconception is often found in the way we view the poor. Therefore, if you want to say "If someone is poor, it's because they don't work hard", think again. In fact, poverty is a complex issue with many reasons behind it. In my opinion, these opinions are made by those who lack empathy, are ignorant, and judge everything by material things. They even forget that their success is not solely the result of their hard work, but also the support of people, relationships, privilege and luck. If you can put aside the material and look further into the social side of poverty (and the success you have), you won't come to that conclusion. Perhaps the poor are the most hardworking among us.
In a competitive world where people are vying to be financially well off and even exceed an adequate standard of living, ambition can blind people into believing that poverty is an option. Some argue that individuals who face difficult economic conditions are lazy or lack determination in their efforts to improve their financial situation. The assumption that everyone can prosper through hard work creates an inaccurate and overly simplistic perception of the complexity of poverty. It is important to remember that the reality of poverty involves complex dynamics and factors that cannot always be overcome through individual effort alone.
Being born poor is like a bird without a cage, they have no solid foundation to plan for the future, even to fulfill their basic daily needs. The income earned is only sufficient for primary and urgent needs. In addition, they face limited employment opportunities due to low levels of education and skills. As a result, the cycle of poverty will continue. Financial hardship is exacerbated by poor health conditions, which can worsen financial conditions and ability to work. Access to nutritious food and basic necessities with adequate sanitation is difficult to obtain, with significant impacts on health and cognitive function and thus psychological well-being. To make matters worse, some poor households have to pay for 'clean' water. But how do they receive that water? How do they carry it home? Do they use clean, covered containers? Do they wash their hands first? Finally, is the water that has arrived at home as clean as the clean water they bought earlier? See how complex the issue of poverty is from just this one example.
On the other hand, most of them also have low money management skills. This is because, as I mentioned above, they are used to spending their income on essentials only. When one struggles to fulfill their basic needs such as food, shelter, and healthcare, long-term financial planning may become neglected. The focus often shifts to immediate issues rather than future-oriented financial decisions. In addition, they may have limited access to traditional banking and financial services. This may hinder their ability to learn and practice financial management skills that are often facilitated by mainstream financial institutions. So, do not be surprised if social assistance in the form of cash does not necessarily lift a family out of poverty.
To close this article, I would like to emphasize once again that poverty is not an easy issue to tackle. Despite the many efforts and aid programs that have been implemented, poverty continues to be an intractable reality. Challenges arise from both the government and policy makers. On the other hand, living in poverty means living in conditions with all the limitations that hold them back from all sides, and those who remain in poverty do not mean that they are not fighting for it. By recognizing the complexity of poverty, we can acknowledge that every group in society has a meaningful role to play in efforts to reduce poverty. This is not just the responsibility of the government or aid agencies, but a collective duty for us as social beings. Whatever we have, be it in the form of materials, intelligence, or expertise, should be a resource that we channel to those less fortunate.
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