This publication was prepared and released with partial fi nancial support of the project «From the Crisis towards Decent and Safe Jobs», in the framework of Agreement between the Ministry for Foreign Affairs of Finland and the ILO. ILO Decent Work Technical Support Team and Country Offi ce for Eastern Europe and Central Asia International Labour Organization Methods for estimating the poverty lines: Four country case studies ILO Decent Work Technical Support Team and Country Offi ce for Eastern Europe and Central Asia 2012 Copyright © International Labour Organization, 2012 First published, 2012 Publications of the International Labour Offi ce enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. 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ISBN 9789221268864 (print); 9789221268871 (web pdf) ILO Decent Work Technical Support Team and Country Offi ce for Eastern Europe and Central Asia poverty / low income / income distribution / basic needs / measurement / methodology / Bulgaria / Canada / Finland / Russian Federation 03.03.6 The designations employed in ILO publications, which are in conformity with United Nations practice, and the presenta- tion of material therein do not imply the expression of any opinion whatsoever on the part of the International Labour Offi ce concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their au- thors, and publication does not constitute an endorsement by the International Labour Offi ce of the opinions expressed in them. Reference to names of fi rms and commercial products and processes does not imply their endorsement by the Interna- tional Labour Offi ce, and any failure to mention a particular fi rm, commercial product or process is not a sign of disap- proval. ILO publications and electronic products can be obtained through major booksellers or ILO local offi ces in many coun- tries, or direct from ILO Publications, International Labour Offi ce, CH-1211 Geneva 22, Switzerland. Catalogues or lists of new publications are available free of charge from the above address, or by email: [email protected] Visit our website: www.ilo.org/publns Printed in Russia Table of Contents Foreword Chapter 1. Poverty Lines in Bulgaria Bogdan Bogdanov 1. A Brief History of the National Poverty Line 7 2. Estimation of National Poverty Line 10 3. National Poverty Line and Social Security 14 4. Analysis and comparison of the estimates from poverty surveys conducted in Bulgaria 19 5. References 27 6. Appendices 28 Chapter 2. Poverty Lines in Canada Kentaro Nakajima 1. Introduction 33 2. The Low Income Cutoffs (LICOs) 33 3. The Low Income Measure (LIM) 33 4. The Market Basket Method (MBM) 33 5. Conclusion 44 6. References 44 Chapter 3. Poverty Lines in Finland Susan Kuivalainen, Pasi Moisio 1. A Brief History on the estimation of the National Poverty Line in Finland 46 2. Minimum income protection 49 3. Conclusion 60 4. References 61 5. Appendix 62 Methods for estimating the poverty lines: Four country case studies 3 Chapter 4. Poverty Lines in Russia Yuka Takeda 1. Introduction 65 2. Minimum consumption basket in the Soviet period 65 3. Introduction of the measurement methodology of subsistence minimum in Russia: The 1992 Methodology 66 4. Revisions of the measurement methodology of subsistence minimum in Russia: The 2000 Methodology 68 5. Consumption basket in Russia based on the 2000 methodology and its regional peculiarities 70 6. Subsistence minimum as a social indicator 74 7. Conclusion 75 8. References 76 9. List of regulations related to subsistence minimum in Russia 76 10. Appendixes 77 4 Methods for estimating the poverty lines: Four country case studies Foreword Supporting productive employment and social protection of women and men is one of the three priorities of the Decent Work Country Programme (DWCP) of the Republic of Kazakhstan for 2010-2012, which was developed by the Government, the social partners and the ILO. The ILO technical assistance on assessing and improving the methodologies of the subsistence minimum calculation in Kazakhstan was envisaged under this priority. Following the offi cial request made by the Ministry of Labour and Social Protection (MOLSP), the fi nal report was prepared covering the analysis and assessment of subsistence minimum calculation meth- odologies. The fi nal report consists of two volumes, which serve different purposes. The fi rst volume focused on the subsistence minimum calculation methodology and determination was printed as a separate publication. This publication is a second volume of the fi nal report and it intends to provide some international examples of poverty line estimations and to serve as a reference for further policy formulation in Kazakhstan. In the course of preparing the fi nal report, tripartite consultations with the Kazakh partners have been organised in order to refl ect their priorities and interests. As a result, the following four countries were selected: Bulgaria, Canada, Finland and Russia. The second volume of the fi nal report was prepared by the following authors: Bogdan Bogdanov, Head of the Household Incomes and Expenditures Statistics Department, The National Statistical Institute of Bulgaria: the Bulgarian case; Kentaro Nakajima, Associate Professor, Graduate School of Economics and Management, Tohoku Univer- sity, Japan: the Canadian case; Susan Kuivalainen, Research Professor, Minimum Income Unit, National Institute for Health and Welfare, Finland and . Pasi Moisio, Head of Minimum Income Unit, National Institute for Health and Welfare, Finland: the Finnish case; Yuka Takeda, Assistant Professor, Institute of Economic Research, Hitotsubashi University, Japan: the Rus- sian case. All country cases cover the historical development of the national poverty lines and present a system for estimating the poverty line (or something equivalent). Each country applies different poverty indicators, such as the absolute poverty line/the subsistence minimum, the relative poverty line or other types of poverty measurements and these indicators serve different purposes depending on national needs. This report was completed under the supervision of Mariko Ouchi, Senior Social Security Specialist of the ILO Decent Work Technical Support Team and Country Offi ce for Eastern Europe and Central Asia (ILO DWT/CO-Moscow). The technical comments provided by Hiroshi Yamabana, Senior Actuary of the Social Security Department at the ILO Headquarters have been refl ected in the fi nal version of the report. Talgat Umirzhanov, ILO National Coordinator for Kazakhstan and Eleonora Salykbayeva, ILO Project Assistant in Methods for estimating the poverty lines: Four country case studies 5 Kazakhstan for Finland’s funded Technical Cooperation Project “From the Crisis towards Decent and Safe Jobs”, provided valuable guidance and assistance throughout the preparation of this report. We trust that this report will be a useful reference for those concerned with the development of a better pov- erty measurement system in Kazakhstan as well as in other countries. Moscow, August 2012 Shurenchimeg Zokhiolt Mariko Ouchi Deputy Director Senior Social Security Specialist ILO DWT/CO for ILO DWT/CO for Eastern Europe and Central Asia Eastern Europe and Central Asia 6 Methods for estimating the poverty lines: Four country case studies CHAPTER 1 Poverty Lines in Bulgaria Bogdan BOGDANOV 1. A Brief History of the National Poverty Line 1.1. Introduction to the National Poverty Line According to a defi nition by the EU from 1984, impoverished people, families and groups of people are those whose material, cultural and social resources are limited in a way that excludes them from the minimum acceptable way of living in the community to which they belong. The investigation of poverty in Bulgaria began in a more focused and systematic way after the political changes at the end of 1989. In principle, the ‘poverty’ phenomenon did exist before those changes (under the conditions of totalitarian society), similar to any other society, but it was covered under the term ‘low income population’. During the transition to a market economy, over approximately 20 years, poverty acquired a new appearance and dimensions. Property was privatized and new distribution and re-distribution processes were adopted, but in general, the change was not a positive one for the development of the state. The new democratic so- ciety was constructed in parallel with a number of negative infl uences including criminality, corruption, and the abuse of political infl uence.