Based on this line of monetary poverty, DANE says that 35.7% of the people in Colombia would be impoverished, and of these 9.6% in extreme poverty. Therefore in 2019, there would be 4,367,500 impoverished households. Therefore, close to 30.4% of the households would be living under the poverty line this year.
According to the last DANE’s Household National Survey and taking into account how it classified households in: (i) Impoverished if the monthly income is lower than Col $1,310,696 (US $359,63); (ii) Vulnerable, if the daily per capita income is above the poverty line but under PPP1 US $ 10; (iii) Middle class if the daily per capita income is between PPP US $10 and US $50, and (iv) High class if the daily per capita income is higher than PPP US $50 (table 1).
Without considering other territorial domains, the following would be the Colombian social structure for 2019, before COVID-19:
This structure is consistent with the high degree of inequality or income concentration in Colombia, which according to Garay & Espitia 2020a, and 2020b2; it would be close to 0.62—calculated by the Gini index—.
Considering the territorial domains, poverty for 2019 would be 30.1% in terms of households and 35.7% in terms of people, compared to 29% and 32%, respectively, without considering territorial domains, i.e. a difference of 1.1 and 3.7 percentage points.
This shows the critical social situation of the country in 2019, even before getting worse due to COVID-19, with the aggravating factor that according to DANE statistics in terms of people: (i) the level of monetary poverty of the unemployed population would have been 58.8% and 44.7% for independent workers (ii) that women would be more impacted, exceeding the monetary poverty line of men (34.4 %) in more than 3.8 percentage points, (iii) the level of monetary poverty of youngsters under 25 would be close to 43% at a national level and 50.6% in cities and dispersed rural areas, (iv) that monetary poverty in population centers and dispersed rural areas could have exceeded 47.5% compared to 32.3% of the cities, 27.6% of the 13 largest cities and metropolitan areas and 35.7% of the national average (table 2).
The household number matrix that consume different types of goods and services and the relationship of these with the expense level shows that, on one side, 65.6% of the households have an expense lower than 2 legal minimum wages (LMW) and 18% between 2 and 3 LMW; and on the other, the existence of statistically significant differences between cities and “populated centers and dispersed rural areas” regarding the percentage of households with an expense under an LMW: 21.1% vs. 59.2%. Therefore, of the 14.3 million households in Colombia, 29% had an expense level under 1 LMW and 36% between 1 and 2 LMW. In the cities, these percentages were 21% and 38 %, while in the populated centers and dispersed rural areas they were 59% and 31%, respectively.
Now, if the DANE poverty line is over one LMW, then the percentage of households with an expense under the poverty line in the rural area is close to 60 % and 25% in cities. Therefore, with this social and economic impact added to the COVID-19 pandemic, a basic rent should be established for the rural sector covering 100% of the impoverished and vulnerable population. If this basic rent is of one LMW, its cost would be 0.22% of the GDP and would cover an important percentage of the households of the sector and have a great impact on poverty.
Given the high probability that the poverty situation and social vulnerability to deepen considerably in Colombia (being women and youngsters the most impacted), the authorities could think of a basic rent of one LMMW for all households in poverty and vulnerability situation, which would have a monthly cost of 1% of the GDP.
People in vulnerability situation of people with a per capita income of less than 0.5 LMMW are about 4,800,000, which given the situation have a high probability of falling into poverty with a reduction of their income due to the loss of employment or the impossibility of doing independent work.
In this scenario the number of people under the poverty line could have increased in other 5 to 10 percentage points in the third quarter of 2020, representing between 37 and 42% of the Colombian population, and up to 40 to 45% if the territorial domains are taken into consideration.
A similar situation occurs with “middle class” people. Supposing that the households that have an income less than 2.5 LMMW (around 5,800,000 people), had a drop in their income due to a loss of employment, they could also face a vulnerability situation; increasing the vulnerability population of between 4 to 8 percentage points, rising between 23.5 and 27.5% of the Colombian population. However, in net terms, the vulnerability population would be reduced to close to 17.5%.
In summary, under this hypothetical scenario, the population in monetary poverty or vulnerable could rise to close to 54.5 - 59.5% —in terms of people— toward the third quarter of 2020, resulting from the drop of the GDP and the consequential increase of unemployment, with a drastic reduction of income of the population which, among others, would have lost their employment or could not carry out their normal activities—such as the case of independent workers, mostly informal— due to the lockdown and social isolation to face the COVID-19 pandemic.
Under these circumstances, it is clear that the monetary transference governmental programs known as Familias en Acción (Families in Action), Jóvenes en Acción (Youngsters in Action), Adulto Mayor (The Elderly), Devolución del IVA (VAT Refund), and Ingreso Solidario (Solidary Income) are insufficient in terms of the amount because it would be equal to less than 12% of the poverty line of a 4 people household, but that its net coverage in terms of households would not cover even the equivalent of the total households in poverty, without covering households in vulnerability.
These are sufficient reasons to rethink the amount and coverage of these government monetary transfer programs for households or people in poverty and vulnerable for the purpose of alleviating their critical income situation and guaranteeing their right to a vital minimum for the great majority of the Colombian population, without losing sight the special situation of other groups such as women and youngsters under 25, as well as independent workers.
A suitable social policy for this purpose would be to establish a transitional basic rent—substitute or complementary to the existing transference programs— for households of “populated centers and dispersed rural areas” (59% of the families with an expense lower to the poverty line) as well as for cities (21% of the households).
1 Purchasing power parity (PPP): the end sum of goods and services.
2 Garay, L. J. y Espitia, J. E. (2020a). “Elementos técnicos para un necesario debate sobre mediciones de concentración de ingresos en Colombia”. Septiembre 21; y Garay, L. J. y Espitia, J. E. (2020b). “La concentración y composición de ingresos de las personas naturales en Colombia”. Octubre 5.
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