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Stanford University recently released a new study that looked at various poverty measurement approaches in order to understand how measurement impacts poverty alleviation. It’s common knowledge that public, private, non-profit and international development organizations all need to measure poverty in order to inform their operations. But these researchers found that not only are the measurement tools used by these organizations vastly different, the way that they each define poverty, impacting who qualifies for aid, is also vastly different. The study found almost no agreement among the four main approaches used in the development space. It also found that methodological choices have a major influence on who qualifies for programs and policies that are being implemented by governments, NGOs and other actors.

What does this mean? First, it means that different households will qualify for different types of support, depending on which measurement approach is being used. One family may be poor enough to qualify for anti-poverty programs offered by a local NGO, while not qualifying for programs offered by the government — which results in an overall discrepancy between who is being helped and who needs aid. Second, it means that the different entities in the global development industry are not working together or communicating in order to align their efforts and achieve their shared goals. To take one prominent example of this dynamic, though organizations across the sector have come together to work on the UN’s Sustainable Development Goals, instead of collaborating for the best results, they’ve tended to work in silos, hindering their ability to achieve a positive end result.

As the Stanford study’s lead author Christine Pu, a PhD student in civil and environmental engineering put it, “In our study, we find how one chooses to measure poverty can completely change the extent to which programs and policies reach vulnerable populations.”

However, the study fails to question whether the four common measurement approaches the researchers examined are actually the best way to measure poverty in the first place. These approaches — which include “regular” daily per-capita expenditure; the Demographic and Health Surveys’ wealth index; the Poverty Probability Index (PPI); and Anirudh Krishna’s Stages of Progress — are all top-down and do not consider the poor people’s perspectives and points of view.

Additionally, the conclusions the study is reaching are framed largely around their relevance to a select group of people at the policymaking level, not the decision-makers at the family household level, where health, education and income decisions are made — even though these individuals are the ones being researched, and are most impacted by the study’s results. This dynamic is similar to what happens in the current poverty measurement approaches the study assesses, which also aggregate information and data in the form of statistical indexes geared toward decision-makers at the top. These are all long-standing issues in poverty measurement — I noted the same challenges in 2009, when I started researching the issue of poverty through my work at Fundación Paraguaya, which I founded in 1985.

The Poverty Stoplight: A New Way to Measure and Alleviate Poverty

After years of research into poverty measurement and “alleviation,” I found that the measurement tools being utilized across the development sector were not the best forms of measurement. I also found that there were too many measurement tools available, hindering overall success, and that no one wanted to own poverty, which impacts whether it can even be solved or alleviated. In fact, most experts I’ve spoken to don’t believe the problem of poverty can actually be fully solved, which is why the word alleviation is often used instead of elimination, even though eliminating poverty is the preferred outcome.

Over time, I’ve discovered that listening to people about their own experiences is the missing first step to both accurate measurement and transformational social change. No one knows more about poverty than those who are experiencing it, and external studies and solutions tend to only concentrate on the appearance of poverty rather than its essence. In other words, they often focus on establishing that a household does not earn a high enough income to meet its needs, then labelling it as impoverished, rather than identifying and understanding the factors that are causing the family to not earn sufficient income, and working on solutions to those issues.

Additionally, I’ve learned that poverty is not just about insufficient income: rather, it entails deprivations across multiple dimensions. It has profound structural and systemic causes that are intertwined with both individual behavior and culture. As a result, in order to overcome multidimensional poverty, families need to understand their own situations, limitations and successes, while also gaining access to government and NGO services and economic opportunities that are available to them. Both the providers and recipients of anti-poverty measures must work in tandem, and therefore they must have the same understanding of the root causes of the household’s poverty, and the actions they each can take to address them.

To clarify and promote this dual approach, my team at Fundación Paraguaya and I created the Poverty Stoplight, which serves as both a new poverty metric and a coaching methodology that enables families to quantify their level of poverty and identify customized strategies to address the specific deprivations they face.

The Poverty Stoplight approach is completely different from other measurement tools. It starts by conducting a self-assessment survey directly with the family, to assess the severity of their poverty and the real-world impacts it has on their household. After the survey, the results are presented in a dashboard, instead of the less-accessible statistical index common in top-down anti-poverty research. This dashboard uses colors and pictures to define poverty, with red, yellow and green representing “non-poor,” “poor” and “very poor,” using these visual elements to illustrate a household’s “heat map.” This simple, intuitive approach allows individuals to define what poverty and non-poverty mean to them, and enables them to measure their own poverty, track it, and create a plan to pull themselves out of it, with a case worker aiding them in finding workable solutions.

The Stoplight tracks poverty across six dimensions — income and employment, health and environment, housing and infrastructure, education and culture, organization and participation, and interiority and motivation. These dimensions are operationalized into 50 indicators. Hewlett-Packard helped us in the design and creation of the survey, which features categories visualized through pictures. People diagnose their level of poverty by selecting the picture that best represents their situation. So far, this approach has been implemented in over 59 countries, by over 850 organizations, and used by over 355,000 families.

A Missing Component of Poverty Alleviation

The private sector has been key to the implementation of the Poverty Stoplight approach, just as it’s a key element of the broader poverty equation. For decades, the global development sector has focused almost entirely on government services and the work of nonprofits and NGOs in poverty alleviation. But both the drivers of poverty and some potential solutions exist beyond the confines of these typical development sector players. Specifically, the role of markets and for-profit business is widely left out of anti-poverty discussions and strategies, despite their clear impact on these issues.

To take one example, many companies may believe that by paying their workers the minimum wage, they’ve done their part in fighting poverty, and their employees’ entire households are fine. However, as I mentioned earlier in this article, income is just one piece of the picture. Even with a decent income, many employed individuals are considered “poor” or “very poor” in some of the areas assessed by the Spotlight, such as health and environment, education and culture, organization and participation, and interiority and motivation — and these individuals may not even realize it.

Businesses can play a role in addressing poverty among their workers by implementing programs that help workers to be more aware of their situations and support them in finding solutions. Fundación Paraguaya itself has taken that approach: The organization got its start as a non-profit microfinance lending institution, and has since incorporated other services such as financial and entrepreneurial education programs for young people, and a network of self-sufficient agricultural schools in rural areas. Beyond that, we adopted the Poverty Stoplight for all of our workers, using it to successfully incorporate a business-oriented solution into our poverty elimination strategy: This was the start of our Business Stoplight, which uses the Poverty Stoplight model but allows it to be implemented by the employer.

Collaboration between the public and private sectors is a promising way to amplify the anti-poverty efforts of both businesses and governments. I have personally witnessed how impressive the results of these collaborations can be: We worked across both sectors to get the word out about the Poverty Stoplight and our Business Stoplight initiative in Paraguay, which has been adopted by over 200 companies to help workers improve their quality of life beyond the workplace. The Business Stoplight has been adopted across a wide variety of industries, including restaurants, food production factories, car dealerships, healthcare offices, construction companies and even soccer clubs.

I believe that leveraging market solutions and bringing corporations and other for-profit businesses onboard is the missing key to poverty elimination. Despite the development sector’s long history of favoring public or non-profit approaches, there has been a shift in perspective in the past decade, and socially responsible business strategies are becoming more popular. Within the private sector, the value of anti-poverty work is also becoming increasingly clear: Government-funded poverty elimination services directly impact businesses, and it is their tax dollars, alongside those of the individual, that are being used to fund these services. Additionally, thanks to studies from Oxford University and others, we know that workers are 13% more productive when they’re happy — and as financial challenges at home can lead to less effectiveness at work, businesses are increasingly moving beyond the basics of corporate social responsibility to eliminate poverty for their workers.

These efforts must continue to grow if the world hopes to end poverty. But for that to happen, stakeholders across sectors need a reliable way to measure and track poverty in the first place. Without listening to the perspectives of the people who are experiencing poverty, it will be impossible to eradicate it.

Martin Burt is the founder and CEO of Fundación Paraguaya.

Photo credit: Jamie, via Flickr.