If you’re reading this blog, it’s unlikely you spend a great deal of your time waiting for things – perhaps several minutes in line at the grocery store, or longer in a doctor’s waiting room. But what if you had a long wait ahead of you each time you needed to go to the bathroom or get a drink of water? How valuable is your time? If it were possible, would you pay to always be the first in line? If so, how much? These are the sort of questions that we started to ask ourselves when the Opportunities for the Majority of the Inter-American Development Bank first approached us with the idea to conceptualize and quantify a concept known as the “poverty penalty,” which is in fact a tax on being poor.
We are students at at Columbia University’s School of International and Public Affairs, and we took on the challenge of devising ways to measure the poverty penalty as our “capstone project” – an independent study required for our degrees.
Our first challenge as a group was building a methodology that would enable cross country comparisons of the poverty penalty, as well as to measure inequality of access. Because of data availability, we decided to focus on the countries of Mexico and Peru and to study their Water, ICT and Health sectors. Our goal was to use available information to create a set of methodological tools to measure access, quality, and usage of these services, which many of us take for granted; and also to provide a more comprehensive picture of how these market failures affect the poor. To this end, we created two indexes: The Poverty Penalty Index, which measures the relation between cost and quality (where one represents the highest cost and lowest quality) and the Unequal Access Index, which attempts to create a bottom-up approach to quantifying the challenges poor people face in accessing quality products and services at affordable prices.
Although the objective was to create methodologies that could be applied across sectors and countries, we wanted to go beyond that and understand how low-income families in Mexico, Peru, or any other Latin American country, experience this penalty and the challenges the face in their day to day living.
Imagine two families living in a Mexican town. The “Reynosa” family lives in a modest house.They don’t have running water, so three times a week family members have to walk a quarter-mile to the center of the town and wait in line at the water kiosk. The family is lucky if they can fill three heavy buckets, which they have to carry all the way back. The water will be used to do the washing, cooking, cleaning and drinking. This water often contains dangerously high levels of pathogens, so the Reynosas sometimes suffer from water-borne illnesses that keep them home from work or school, and lead to expensive doctors’ visits and medicines.
Across the street lives the “Diaz” family. They lead a more privileged lifestyle, with running water in their kitchen and bathroom, as well as safe filtered water delivered to their doorstep three times a week. No buckets, no wait, no illness, and no anxiety.
These families pose another interesting challenge: what metrics could adequately assess and quantify the burden felt by the Reynosa family? To try to answer this question, we focused on two less-tangible components: the loss in productivity by wasting time waiting to get water and the additional expenditures of medicines and doctor visits for water-borne illnesses that unquestionably increase the burden for being poor paid by many families like the Reynosas.
The example of water is just one way to look at the ‘poverty penalty’ problem. While access and quality are just a few components of assessing this burden on the poor, we believe that the methodology we are designing has the potential to forge two parallel paths, contributing to increased access and improved quality of services and products. Our work, we hope, would serve as a guide for private sector companies to understand the opportunity to create socially responsible and profitable business models that would contribute to reduce the burden of being poor among low-income markets. For example, a company might install a safer water supply closer to the Reynosas’ home, or make it possible for them to add indoor plumbing by paying in installments. Even though the Reynosas don’t have a lot of money to spend, they might be interested in options like these – especially when they realize it could mean they would have more time to work or study and might suffer fewer sick days. In the future, we hope that private sector entities, researchers, and policymakers alike can pick up where we leave off to save families like the Reynosas time and money through market-based solutions.
Composed by Paola Garcia-Chinas, Elia de la Cruz, Gwyneth Fries, Kristina Leszczak, Kelly Maslick and Carlos Perez.
