WHY POVERTY?

Is an average Ukrainian doing any better today, given the context of ongoing economic reform? This question has been raised in public media and social media in Ukraine, yielding widely different answers and interpretations. Some sources claim that we are experiencing the best improvement in social welfare there could be, under the circumstances. Yet the real impact of austerity and lack of public accountability on the vast majority of Ukraine’s population is underestimated.

As Independent Expert on the effects of foreign debt and human rights Juan Pablo Bohoslavsky said after his recent visit to Ukraine, “The economic trends, conditions and challenges of a country are also determining factors in the protection and realization of human rights. A healthy economy must prioritize the well-being of the most vulnerable and marginalized members of society, not disregard them.”

Let’s take a look at one crucial statistic that could be used to estimate socioeconomic well-being in a given country – its poverty rate. Recently, a variety of sources cited that the subsistence minimum in Ukraine is increased by 77 UAH (less than $3), now amounting to 1777 (around $68) per person. While the trend towards growth of social standards is optimistic, putting it into a broader socioeconomic perspective is useful yet difficult due to outdated statistics on poverty rate, employment, migration, etc.

A discrepancy exists between media consensus on poverty and the situation on the ground. For example, in December 2017, a variety of Ukrainian media outlets simultaneously published a report suggesting the that poverty rate in Ukraine is currently at the level of 12%. Several authoritative sources, including the UNDP, cite higher numbers – ranging from 60 to 90 percent.

Since statistics impact public opinion and policy in powerful ways, an under- or over-estimate of poverty can lead to confusion about the real need. To talk about poverty rates with any certainty, we must first answer the question – what are the factors that impact poverty in the unique context of Ukraine?

Absence of poverty would indicate full “access to necessary goods and services,” including shelter, utilities, food, clothing, medicine, hygiene, etc. Dr. Oleksandr Potapenko, citing data of the World Economic Forum, states that people who spend 60 or more percent of their income on basic needs (food, utility bills, housing, clothing), can be considered poor. The EU, in turn, uses 9 non-monetary criteria that can be found via this link, and that include inability to pay unexpected financial expenses and household debt. If any of the 4 in 9 factors are met, a person or a household meets the ‘deprivation’ criteria.

All the while, independent analytical agencies stray from the above mentioned definitions of poverty and use subjective self-evaluation as a research basis. For example, the 12% estimate was obtained via analysis of self-reported measures.

In the recent years, Ukraine has gone through major crises that often weren’t reflected in the calculations of international or domestic institutions. Some of them merit a closer look:

• According to  national statistical service UkrStat, per-month subsistence levels declared by the state are lower than the de-facto subsistence minimum. Subsistence minimum is the cost size of normal functioning of human body, sufficient for providing, preserving his health of set of food, and also the minimum set of nonfoods and the minimum set of services, the basic social and cultural needs of the personality, necessary for satisfaction. Since 2014, the latter has increased by UAH 1289 while the official increase constituted only UAH 212. In 2018, the official subsistence minimum is 1777 UAH, while the de-facto one, as of May 2018, is 3 293 UAH ($125). It is clear that living on the subsistence minimum proposed by the government means living at least at, or below, the poverty line.
• A great number of households in Ukraine lack the funds to satisfy their needs due to salary delays. State statistics service estimates that wage arrears increased up to 44,2% in the last year and now they are estimated at more than 2 billion UAH.
• In 2016, 44% of households in Ukraine denied themselves all necessary things except nutrition.  
• Poverty estimates are missing data on informal economy in Ukraine. Many workers are employed without social protections and formal salaries, putting them at risk for abuse by the employers.

Neal Walker, United Nations Resident Coordinator and UNDP Resident Representative in Ukraine, stated during the presentation of the latest Human Development Report that about 60% of Ukraine’s population is now living under the poverty line. The current increase in the subsistence minimum does not do much to stabilize the economy, and the need for better social policy is eminent as ever.

Going back to the assessment of Juan Pablo Bohoslavsky, “Sustainable public finances must be ensured in Ukraine, not exclusively for access to international financing or servicing of debt, but crucially to guarantee social justice for all, and to comply with human rights obligations. Regardless of the macroeconomic choices to be made, human rights should be at the centre. Economic inequality and the reduction of income of the poor segments of the population hamper domestic demand, sustainable development and growth.”