Urban Poverty

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Urban poverty was not an issue for the government until the mid-1990s,

because urban residents were covered by a wide range of welfare programs

from the government or state-owned enterprises. Up to then the government

treated poverty exclusively as a rural problem. To date the government has

released no offi cial poverty lines or poverty counts for the urban population.

State guarantees of jobs, pensions, housing and health care for all urban

workers under socialism, along with a strict residence permit system, created

a large urban–rural income gap that has been widened rather than reversed

by market reforms. Early estimates of urban poverty by the World Bank

(1992) found insignifi cant poverty incidence up to 1990. However, since the

mid-1990s, restructuring of state-owned enterprises and substantial layoffs

of workers have created signifi cant dislocation for many workers. Growing

urban poverty thus has become a real prospect.

Table A.4.5 Recent trends in urban poverty

Poverty headcount rate 1990 1992 1996 1998 1999 2000

at $1/day income

National 23.1 21.6 10.6 7.9 7.8 8.8

Rural 31.0 30.0 14.9 11.4 11.2 13.7

Urban 0.9 0.0 0.2 0.0 0.25 0.3

Poverty headcount rate

at $1/day consumption

National 32.9 30.2 17.4 17.8 17.8 16.1

Rural 44.4 41.4 24.8 26.2 27.0 25.0

Urban 1.0 0.8 0.4 1.0 0.5 0.5

Source: World Bank (2003).

Using grouped income data, Khan (1996) estimates that the urban poverty

headcount fell from 20 per cent in 1981 to 13 per cent in 1985 and to only

5 per cent in 1991. Khan and Riskin (2001) estimate an urban poverty rate

of 6.8 per cent in 1988 and 8.0 per cent in 1995. Using urban household

survey data collected by the NBS and the US $1 a day poverty line, the

World Bank (2003) estimated that the urban poverty headcount rate in the

1990s was equal to or below 1 per cent, measured either with income or

consumption data (see Table A.4.5). Compared with rural poverty, urban

poverty appears much less of a problem from these estimates. However,

Khan and Riskin (2001) argue that the World Bank’s urban poverty line

is too small a percentage (23 per cent) of average income to be realistic.

However, many of the potential biases in constructing rural poverty lines

and poverty counts also characterize urban poverty statistics. Valuation of

non-wage benefi ts is particularly diffi cult.