This article first appeared in The Edge Malaysia Weekly on February 17, 2025 - February 23, 2025

In the 1990s, Sabina Alkire faced an uphill battle trying to convince economists that traditional poverty measurements were not comprehensive enough.

She had conducted her doctoral field work in Pakistan, spending time with women who were part of an income generation project run by non-governmental organisation Oxfam. She did “fancy economics on net present values and internal rates of return”, she says, to determine how much income was generated from the project for the women.

But when she spoke to the women on what mattered to them, the conversation was not what she had expected.

“They talked about relationships, [about how] they sat together, how they sang, and they talked about their children and marriage. They valued learning how to sell in the marketplace and the meaningfulness of their work,” Alkire tells ESG during her visit to Kuala Lumpur last month where she was a speaker at Forum Ekonomi Malaysia 2025, organised by the Ministry of Economy.

“For example, some women plucked flowers and made garlands, which were put as an act of adoration on the Holy Quran. They felt that they had done a holy work and peace came.”

The women also spoke about social inclusion as they were marginalised and were not permitted in the houses of others, she adds.

“But when they started to sell rose garlands, they were invited in. The people would say, the smell of roses is always on your clothes. It was a change from how they were seen in society. I realised then that if I were an economist, I would just have been measuring the income of these projects and overlooking what mattered to these women,” says Alkire, who is a professor at the University of Oxford’s Department of International Development

The traditional method of measuring poverty was based on monetary income, which she realised could not capture the true experiences of people living in different conditions. As a result, initiatives to reduce poverty became less effective in targeting those who really needed help.

Alkire, with her colleague James Foster, went on to devise a method to measure multidimensional poverty that is meant to complement monetary poverty measures but adds dimensions such as health, education, nutrition, standard of living, work, security and lived environment.

The concept gained more prominence after the Sustainable Development Goals were introduced by the United Nations at the turn of the century. Some countries, such as Mexico, began to adopt the methodology and launched their official multidimensional poverty index.

Alkire and Foster’s method is applied through the global Multidimensional Poverty Index (MPI), which is updated annually by the Oxford Poverty and Human Development Initiative (OPHI), of which Alkire is director, and the United Nations Development Programme (UNDP). In 2024, more than 40 countries had an official national MPI.

Malaysia is one of them, having established its official MPI in 2015, but it has not featured prominently in policy formulation or public discourse, according to a report by the World Bank in 2021.

This will change as the Ministry of Economy is planning to revise the national MPI with UNDP, OPHI and the University of Oxford. It will be relevant to ongoing discussions in Malaysia on the categorisation of people into different socioeconomic classes, triggered by the fuel subsidy rationalisation and rising cost of living. More precise data on multidimensional poverty can help policymakers make better decisions in this regard.

“Malaysia is a very diverse country, so it is possible to have two different measures for poverty, one for rural areas and one for the lower-middle class in the metropolitan area,” says Alkire.

The new national MPI could be used to provide more targeted assistance and for budgeting, as well as to create new pathways for poverty reduction, she adds. For this to be successful, it must be well communicated to civil servants, policymakers and companies, who will use this information to take the necessary action.

The MPI measures poverty first by identifying dimensions and indicators that reflect poverty in the national development plan and lives of people in that country. For instance, it could be the number of underdeveloped children in a household, whether they have access to the internet, or how many family members are educated or have formal jobs. The person is categorised as deprived or not deprived.

The weighted deprivations are then added up. If the person is deprived of one-third of the weighted indicators, he or she is considered poor. This data then can be aggregated to be compared with the national average, across subnational regions and across the country. This enables policymakers to identify areas in the country where health and education deprivations are most severe, for instance.

The global MPI, which covers 112 developing countries (Malaysia is not included), has 10 weighted indicators grouped under the three dimensions of health, education and standard of living.

When the number of multidimensional poor is compared to those who are monetary poor, a clear trend can be observed.

“From my prior experience as an economist, I was taught that income is a good proxy of education, healthcare and all that. So, you would expect that people who are income poor to be also multidimensional poor,” says Alkire.

But that is not the case. She observed that those who are considered multidimensional poor would say their situation results from many things — it could be in housing, education, access to healthcare or good working conditions — going wrong at the same time. This occurs in high-income countries as well.

In the US, for instance, 12.3% of Americans were income poor, 15% were multidimensional poor and 8.3% were poor by both measures, according to the MPI of the US, as presented by Alkire during her session. This meant that 6.8% of Americans, which translates into 21.7 million people, were multidimensional poor but not monetary poor.

“If you use only monetary poverty [measurements], these people are not in your visual field. You don’t know their situation. But they feel it, and they feel overlooked,” she says.

Why does this mismatch occur? Alkire explains that it could be due to the inaccuracy of monetary data or it could be how people use the money they earn.

“They might have a disabled person at home, they might have an addiction, they might not have a good sense of how to use money or they might have high transport costs because they live in a remote area.”

The mismatch in the US could be caused by access to healthcare, for instance. She pointed out during her presentation that when former president Barack Obama’s Affordable Care Act was in place, multidimensional poverty fell more steeply than monetary poverty.

“A successful health reform may not touch monetary poverty in the same period, but an MPI that includes health will go down that year. Similarly, if education learning outcomes or children’s school careers are lengthened, the monetary poverty measure may not change for some time, but the multidimensional poverty indicated will change that year,” says Alkire.

The impact of climate change on the poor will be disproportionate, and this is a factor that Alkire’s team is looking at. They are planning to overlay climate data, satellite data on wildfires and forest loss, air quality in urban areas, incidences of droughts, floods, earthquakes and cyclones, with the location of households within a 5km radius.

“For example, in the case of Madagascar, we find that the 10 poorest regions in terms of poverty, when you overlay these environmental deprivations that happened at the same time period, nine of the 10 regions were also the worst affected [by these climate factors],” she says.

“What we’re going to try to do globally is pinpoint where in the world it is that the poorest subnational regions and poorest households are also most affected by climate conditions, because you have to address them together.”

Some countries already include climate variables in their national MPIs, she adds. “The Dominican Republic includes whether you live within 50m of rivers that flood, Nigeria includes whether you are affected by different climate shocks and Chile has something on whether you have a leisure space to play football.”

Sri Lanka, meanwhile, has a vulnerability index alongside its national MPI, which considers whether a person was struck by different climate disasters and how well they are able to cope with it.

“I think we’re in a time of great experimentation in the nexus of poverty and climate, so I expect in the next three years, this will be a very fast-moving area, where new tools and some new practices are starting to be consolidated,” says Alkire.

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