I came across this paper recently. It makes some interesting points about the daily lives of the poor in a number of countries, including India. Although not altogether surprising if you sit back and reflect on their observations, this kind of a quantitative study based on household surveys could be very useful for policy formulation. Well worth a read. Some points they make:
- The poor generally hold multiple occupations during different times. For example, during the morning, some women sell dosas, but later they do some rag-picking or daily-wage labour work. Similarly, many men work on their fields during the farming season, but otherwise they often temporarily migrate to the cities or construction sites in search of work. This generally indicates a lack of specialization in any one single profession, which makes it harder for them to find a job. This hurts their earning abilities in the long term. This also probably explains why many of the poor are "entrepreneurs", because they find it much easier to hawk vegetables and other goods than to actually find a well-paying job. One reason that can explain this lack of specialization is that the poor are unable to raise sufficient capital to run a business that would fully occupy them. So, for example, farmers may be unable to use sophisticated technologies to extend their farming season. Or, the women may be unable to convert their individual dosa businesses into a more formal and higher paying outlet.
- Most of the poor rely on informal sources of credit, which tends to much more expensive. The high interest rates seem to occur not because of high rates of default, but because of the problems in enforcement of contracts. The moneylenders or shopkeepers who give credit, have to spend much time keeping track of the expenses and making sure that the people pay back. Instead, formal sources of credit such as from self-help-groups generally help cultivate a discipline for saving and spending money, and also provide lower interest rates.
- An increase in income of the poor is not always followed by an increase in their food expenditure. Instead, they spend significant portions of their income on alcohol, tobacco, entertainment, and festivals. This is probably because they do not make the association between healthier eating and higher productivity, and also because entertainment helps them relax from the daily financial and psychological stress they undergo in search of employment. However, the penetration of television is still quite low, because it is a bulky investment and requires a consistent commitment to saving. This is probably evidence that the poor find it difficult to save money in the absence of any banking institutions or saving-groups because they tend to succumb to temptation much before they can save enough money, and also because keeping cash in boxes or under the pillow is not really secure.
In light of this study, the Pradan approach to self-help-groups seems ideal. They not only help organize the poor into groups, but they also train and educate them in how to save and spend their money. The Internal Learning System of having the women maintain dairies of their saving and expenditure also helps the Pradan volunteers to teach the women how to manage their household budgets more efficiently.
Other things that the paper highlights is that poor land-record management actually prevents farmers from combining their individual small land-holdings into larger and more productive pieces of land. And the poor quality of public education impacts their commitment to sending their children to school. Similarly, the poor quality of public healthcare actually increases their expenses because they either have to go to private practitioners, or bear with ineffective and improper treatment.