Measured as Poor versus Feeling Poor: Comparing Money-metric and Subjective Poverty Rates in South Africa

In this study, we compare subjective and money-metric measures of poverty in South Africa using data collected in the 2008/09 Living Conditions Survey (LCS). In addition to collecting detailed information on expenditure, the LCS asked respondents to provide an assessment of the economic status of their household, ranging from “very poor” to “wealthy”. We find considerable overlap between per-capita expenditure measures of poverty status and subjective poverty status among households. However, we also identify a number of significant characteristics that distinguish households where poverty measures do not overlap, including household size, the share of children and the elderly in the household, home ownership and housing type, access to piped water and electricity, and access to farming land. These characteristics suggest both that expenditure measures are not able to capture the multidimensional nature of economic well-being and that the level of expenditure in the household is underestimated. This underestimation may arise partly because poverty measures based on per-capita expenditure do not recognize scale economies in the household, and also because the value of small-scale economic activities can be difficult to measure, as in the case of subsistence farming.