Association for Public Policy Analysis & Management

This paper aims to measure multidimensional poverty and see how multidimensional poverty is different between races. According to Capability approach, human development is only possible when people can achieve whatever one considers valuable, whereas poverty is viewed as the status when these opportunities are deprived. In this respect, the value of social policy is measured by how influential it is to enhance individual’s capability. Multidimensional in nature, Capability approach measures human well-being with vector sum of each dimensions and poverty, viewed from multidimensional perspective, can provide more vivid picture of what it means to be poor and which area is in most urgent need of resources, which can help allocate limited government resources more accurately and efficiently.

Using well-being data of 2016 PSID, multidimensional poverty was measured. For the measurement method, Alkire-Foster method(AF method) was used. The model consisted of 6 dimensions and 13 indicators; dimensions are composed of overall life satisfaction, living condition, financial and job security, physical health, social activities, and family relationship. From the result, 18.2% of respondents were multidimensional poor. Whites and African-American are multidimensional poor at 15.8% and 22.8% level respectively. Compared to white, African-American has higher multidimensional poverty rate. This difference was also tested with T-test and the difference was statistically significant (p<0.01).

From the dimensional contribution analysis, financial job security contributed the most (23%) to multidimensional poverty, followed by social activities(19%) and overall life satisfaction(18%). Both white and African American group showed similar picture. For multidimensional poverty rate of White people, financial and job security (23%) affected the most to the level of multidimensional poverty, followed by social activities(19%) and overall life satisfaction(19%). Relationship dimension(15%) and physical health(10%) showed modest contribution to poverty, and living condition dimension showed the lowest contribution rate(10%). For African-American, financial and job security(23%) was the most contributing dimension to multidimensional poverty of African-American, followed by social activities(19%) and overall life satisfaction(17%). Relationship dimension, living condition, physical health dimension each contributed by 16%, 13% and 11% to the level of multidimensional poverty.

The result shows that there is clear difference between race, which reveals that African-American people not only have economic problem, but also be experiencing severely overlapped poverty. Also, the contribution rate of living condition dimension is higher for African-American than white or overall respondents. This means that African-Americans are living in more deprived housing or living conditions, which hints that the traditional perspective of explaining poverty might blur the picture of multi-faceted poverty for black people. Plus, multidimensional perspective provides how each dimension contribute to overall level of poverty, which later can be used to allocate limited resources based on policy priority. Limitations of this study is several: dimension selection, indicator selection, and aggregation cutoff selection procedure can be improved. Also, in order to complement official poverty measure, the analysis result can be compared to see how it is different and how it can be interpreted.