SEA - Practical Application of Science Volume I, Issue 2 (2), 2013 Oana-Ramona LOBONŢ Faculty of Economics and Business Administration, West University of Timisoara NEW ALTERNATIVE Literature review POSSIBILITIES FOR MEASURING POVERTY IN ROMANIA Keywords Aggregate Romanian Index of Deprivation Poverty Social exclusion JEL classification I32 Abstract Poverty assessment requires and is generally based on the existence of well-defined levels of standard of living. Therefore, in this paper we try to investigate the opportunities for measuring poverty offered by economic practice, as well as to outline the real possibilities for building an aggregate index, sufficiently complex to reveal the evolution of poverty as economic deprivation in Romania. In this paper, the construction of an Aggregate Romanian Index of Deprivation involves a subjective judgment because this index represents one of the methods used for configure the level and dynamics of poverty and social exclusion. The proposed index focuses on specific issues such as combining a number of indicators, chosen to cover a range of economic, social and housing issues, into a single deprivation score for each region in Romania. 158 SEA - Practical Application of Science Volume I, Issue 2 (2), 2013 1. INTRODUCTION 2002 based on surveys of family budgets. Moreover, in order to meet monitoring in a During the last years, Romania has comparative approach of the progress of paid special attention to social policies, Member States in relation to the objectives especially those related to social cohesion, of the European Union social policy, in equal opportunities and equitable 1997, the National Institute of Statistics distribution of income in order to ensure has suggested an indicator to measure the the resources and opportunities necessary relative magnitude of poverty, as amended for communities to actively take part in the and adapted to the requirements of the economic, social and cultural life. European Council in 2001. The new These objectives have a strategic methodology for the calculation of relative status, being established and put into poverty indicators considered a set of 18 practice at governmental level through indicators to measure social inclusion, out numerous strategies, programmes, policies of which 10 primary indicators and 8 and measures to fight back poverty and secondary indicators. social exclusion. However, since poverty In Romania, by Resolution no. 488 stands for an element which is both of 26 May 2005, approving the national quantitative and qualitative, the economic social inclusion indicators system, it is practice imposed the outline of a set of being outlined the list of main level specific indicators that measure this indicators, also secondary and tertiary, to phenomenon. be calculated annually by the National Avoiding extensive theoretical Institute of Statistics and the Anti-Poverty debates on poverty and social exclusion, and Endorsement of Social Inclusion the approach of the present article is Commission. Diagnosis poverty level is limited to trying to determine opportunities based primarily on the absolute method for to shape a new methodology to quantify the quantification of the phenomenon on these phenomena, without ignoring the the basis of certain indicators to capture the already existing methodologies. dynamics of the monetary dimension of poverty and identification of groups at 2. RETROSPECTIVE LOOK ON THE highest risk: POSSIBILITIES OF MONITORING The poverty rate, the threshold of POVERTY 60% of median income available per adult equivalent, also called In outlining the possibilities relative poverty or risk of poverty; of quantification of the poverty The ratio between top and bottom phenomenon, stands the cooperation quintile of the distribution of between specialists and experts in this population by available income topic, the Ministry of Labour, Family and (the wealthiest 80% compared to Social Protection for the Elderly (current the poorest 20%); name), the National Institute of Statistics, The rate of persistent poverty, at and a number of international bodies, the threshold of 60% of median including the World Bank, the Heritage income available per adult Foundation, The Organisation for equivalent; Economic Co-Operation and Development, Deficit relative to median U.S. Department of Human Services threshold of 60% of median The first attempts to analyze and income; measure poverty have emerged in 1995, Coefficient of variation of when the National Institute of Statistics employment rates; launched a poverty analysis programme, Long-term ILO unemployment based on households’ surveys and, since rate; 159 SEA - Practical Application of Science Volume I, Issue 2 (2), 2013 Proportion of population in Protection and Social Inclusion to achieve jobless households; a permanent exchange (peer -reviewed) The share of young people 18-24 between European Union member states. years old who left the school Moreover, we notice that recently, the early; Romanian Government adopted a number Life expectancy at birth; of strategic documents aiming to fight back The percentage of people who poverty and social exclusion , including the appreciate their health as being National Plan against Poverty and for bad or very bad. Social Inclusion (2004 ) , National Strategy Such systems, developed in order to for Sustainable Development which takes measure poverty, represent a more easily over the stipulations of the Strategy for assimilated instrument for decision-making Sustainable Development renewed for an system as it has been proven the enlarged Europe, adopted by the European sustainability of implementing the Joint Union Council in 2006, the Millennium Memorandum on Social Inclusion, a Declaration which sets the ONU agenda programmatic document of reference for for the 21st century in terms of peace, the elaboration of social policies, security and development, the National concluded between the Government of Strategy for the development of social Romania and the European Commission in services , national reform programs and 2005. other sectoral strategies and action plans . Harmonizing the agents that disseminate the change of vision in the 3. INDICATORS FOR MEASURING area of poverty and social inclusion POVERTY AND SOCIAL through methodologies of calculus EXCLUSION developed within CASPIS and data provided by Romania to the European Means for measurement and Union's official statistics (based on analysis of poverty dynamics in Romania EUROSTAT methodology) assumed are implemented by the National Institute compatibility on the 3 basic pillars: i) of Statistics, based on Household budget concepts, definitions, classifications, ii) survey, taking into consideration poverty data collection methods, iii) sampling lines or thresholds, i.e. a basket with goods methods. and services considered necessary to cover Thus, in compliance with Briciu the basic needs of an individual or (2009: 163) we notice that the household. Poverty assessment implies the implemented methodologies have put a existence of well-defined levels of living two way pressure, namely ”awareness and standards, poverty thresholds called addressing serious concerns, respectively "absolute" and "relative", according to broadening the makers of the current issues their updates on large periods of time, that are already planned resources general compared to the national standard of living issues that require a coherent and of the society. corroborating responsibilities of public The indicator of measuring absolute institutions.” Directions of development of poverty is based on a national social statistics are based on information methodology, developed in 2002 in order collected through a series of surveys of to monitor and evaluate policies and family, household, statistics on living programs aimed at increasing the welfare, conditions and the labour force. to reduce the lack of resources necessary to Strategic approach to social policies ensure basic needs, while the indicator required the adoption of a new instrument, measuring relative poverty is based on the flexible and decentralized called Open methodology approved by the European Method of Coordination on Social Council of Laeken in December 2001, and 160 SEA - Practical Application of Science Volume I, Issue 2 (2), 2013 is adequate to monitor and evaluate poverty assessment, which in their policies aimed at reducing inequality. construction involve both setting monetary Poverty measurement is based on and non-monetary risk indicators, and an the poverty threshold calculated from the equivalence scale for monetary variables results of surveys that provide information and application of methods of aggregation on the rules implemented in food that lead to obtaining synthetic indicators. consumption expenditure, considered as However, poverty measurement and necessary or on the income (or analysis equally lead to the identification expenditure) level of the population, i.e. a of levels of individual or household percentage of them, each of which can be inequality and vulnerability in the society, highlighted as both positive and negative. quantified by specific indicators: Among the indicators used to - Indicators that measure inequality: highlight the poverty profile (Anghelache Gini index, Theil index, dispersal et al, 2006): ratio and income of distribution / - Indicators measuring the consumption of the poorest share of incidence of the phenomenon: the population, human development total poverty rate (head count