How much improvement is good enough?

If you want to know how much money a farmer needs to get by, just ask them, they know. However, be prepared to hear figures that are not very related to  $1.90 or $3.10 per day per person, as the World Bank has established for extreme poverty and poverty lines, respectively. Farmers will likely share the amount of money they need to afford a dignified livelihood or their living income.

International poverty lines have proven tremendously valuable for certain things such as being able to estimate the number of people living in poverty or extreme poverty in the world. In the past, they have also enabled the establishment of global goals to reduce poverty through the Millennium Development Goals (MDGs) or currently through the Sustainable Development Goals (SDG’s).  Additionally, they have also gained a lot of popularity as they have become a widely recognized reference point.

However, international poverty lines also have their weak side. They may not be very relevant when trying to understand the conditions of specific populations. In these kinds of situations, it is more appropriate to use reference points or benchmarks that are closer to the population under study. Sometimes the national lines will suit the need, but in many others, they will still be an average (poverty line) that does not relate much to the needs of the farmers we are working with.

The closer the poverty line or the reference point is estimated, the better it will reflect the specific population conditions. Living Income is a very reliable approach to estimate a benchmark for determining the floor to afford a dignified livelihood.

What is living income?

Living income is defined as the household income sufficient to afford a decent standard of living for all the household members. It is estimated by determining the cost of a nutritious diet, decent housing and other essential needs such as education, health care, transportation, communication, among others. 

The approach to estimate living income is very similar to the one used for national poverty lines. However, it has few elements that differentiates it, making it more valuable than the national poverty lines. For example, all the components included must be culturally appropriate and consistent with local preferences, ensure a level of dignity, it includes an element of reserve for unexpected events and the populations share homogeneous ecosystems and have homogeneous cultures. 

What exactly is the value of living income?

So far, I have identified 4 specific practical uses of living income.

1. Understanding decent standards of living for a population. Before any intervention, a needs assessment should take place. Experts on the area that may or may not consider determining the needs from the population perspective traditionally conduct them. Living income is an alternative that ensures the economic needs to reach a decent standard of living for the specific population at the particular point in time.
2. Understanding the gap. Once the benchmark is estimated, farmer’s income information can complement it to bring valuable insights. They provide clarity of the economic gap, but also bring light into the potential economic opportunities by analyzing the status of their production (farm) systems and other income generating activities (IGA). Understanding the gap can identify opportunities for additional interventions and possible stakeholders that may need to be included in the dialogue.
3. Modeling results. Production information can be used to model the expected results of an intervention in farm production and productivity. Modeling is a tool that can be used to target or segment the intervention to maximize expected returns. Alternative approaches or even new risk mitigation strategies can also result from modeling results.
4. Managing for the benchmark. Once the project is in implementation phase, all stakeholders should understand the living income benchmark, the farmers’ actual income and the economic gap. It will help to keep the “eyes on the prize” or manage for results throughout the project life.

These are just four initial ways to put living income concept into practice. I’m sure that as we continue to adopt this approach, we will be learning and sharing many other insights. My hope is that we eventually transition from estimating the living income benchmarks into sharing results or evidence of interventions using living income as a component of their monitoring and evaluation system.

• This blog is part of a series on what’s new in inclusive agribusiness from April 2017. Hear from more contributors in part one of the series- digging into the details of inclusive business programmes around the world.  In part two contributors share how long-standing perspectives on cooperative, corporate strategies, value chain partnerships, market system change, rural livelihoods support, financing, and innovation adoption are beginning to blend, and why. 
• Read more on key topics in inclusive agribusiness in the series of six theme papers.
• Access over 450 resources on inclusive agribusiness on SearchInclusiveBusiness.org