What has happened to poverty and inequality lately?

About a year ago, the World Bank Group (WBG) redefined its mission, adopting two goals to measure success in promoting sustainable development and monitoring its own effectiveness as a development partner. The first goal is to end extreme poverty, by reducing the share of people living on less than $1.25 a day from 14.5 per cent in 2011 to less than 3.0 per cent of the global population by 2030. The second is to promote shared prosperity by improving the living standards of the bottom 40 per cent of the population. These twin goals maintain emphasis on growth and economic dynamism, while underscoring two important principles: pay special attention to the living standards of the poorer segments of the population, and secure the future of the planet so that current prosperity is not enhanced at the cost of future generations.

How has Bangladesh been faring on the twin goals of late? This is important not just for Bangladesh but also for the WBG mission.  According to the 2011 estimates, almost three-fifths of the world's extreme poor are concentrated in just five countries: Bangladesh, China, the Democratic Republic of Congo, India, and Nigeria. The global poverty target cannot be attained without palpably denting poverty in these countries.  Based on the international poverty line, the poverty incidence in Bangladesh in 2010 was 43.3 per cent. Hence, using the international poverty line, the goal of reducing extreme poverty is equivalent to boosting shared prosperity in Bangladesh. This equivalence disappears when poverty is viewed, as done below, from the lens of Bangladesh's national poverty line, which is lower.   
There is no survey-based evidence about what has happened to poverty in Bangladesh since 2010. However, it is reasonable to assume that the sustained GDP growth rate in excess of 6 per cent, a decent 3.3 per cent agricultural growth, and remittance growth of 6.7 per cent on average since 2010 contributed to maintaining the 1.74 percentage point annual decline observed during 2000-2010. There have also been corresponding improvements in several social indicators, such as life expectancy and the fertility rate. The poverty incidence, based on Bangladesh's national poverty line, is projected to have declined to 24.47 per cent by 2014. UNDP's Human Development Report 2014 finds a significant decline in Bangladesh's Multidimensional Poverty Index from 0.292 in 2007 to 0.237 in 2011. This remarkable progress in poverty reduction is attributable to a decline in the population growth rate and the changing age structure, increases in labour income, internal and external migration, improved connectivity, and the government's targeted safety net program.

The income of the bottom 40 per cent have improved because of increased employment and wages. Total domestic employment is estimated to have increased from 51.9 million in FY10 to 56.5 million in FY13. The shortfall in GDP growth relative to the Sixth Plan target reduced overall domestic job creation relative to the target, but migration abroad more than compensated.  As a result, the total number of additional labourers who found employment in the domestic market or abroad exceeded the number added to the labour force. Consequently, the unemployment rate is likely to have decreased. Agricultural real wages have continued to increase, except in the last half of 2013, when intense political turmoil disrupted internal labour movements.
In the Human Development Index (HDI) 2013, Bangladesh's ranking improved by one step relative to 2012. Bangladesh graduated from Low Human Development (LHD) category to Medium Human Development (MHD) category. In 2012, Bangladesh was below Congo, Solomon Islands, Sao Tome and Kenya at the top of 45 LHD category countries. In 2013, Congo, Sao Tome and Bangladesh graduated to MHD, with Bangladesh ranking third from the bottom in this list. Countries like Nepal, Kenya, Pakistan, Nigeria, Zimbabwe, Tanzania and Ethiopia still remain in the LHD category.
Bangladesh graduated to the MHD category despite an increase in the cutoff point for the category from 0.535 in 2013 to 0.550 in the 2014 index. It surpassed not only last year's cutoff point but also the higher cutoff point this year. This testifies to the magnitude of the increase in Bangladesh's HDI 2013 score relative to the HDI 2012. Bangladesh's recent progress has been impressive on both Gross National Income (GNI) per capita and life expectancy (Table).
GNI per capita has grown rapidly because of growth in GDP per capita and of remittances per capita.  Sustained acceleration of GDP growth, a declining population growth rate, and continued growth of the stock of Bangladeshis working abroad contributed to growth in GDP and remittances per capita.  Most recent research reconfirms that remittances contribute significantly to poverty reduction, both directly by augmenting the income of the receiving families and indirectly by contributing to local level development.
l Gains in the health MDGs have been impressive. The odds of surviving through childhood and pregnancy have increased and the burden of communicable disease is under control. The health sector (government and NGO providers) has continually incorporated proven cost-effective interventions, for betterment of health services. With donor support, the government has focused attention on expanding access to services and strengthening governance.
l Access and completion at all levels of education, especially at the primary level, have improved. As the result of a massive expansion of targeted stipends to bring the poorest and girls into schools and continued investments in education, Bangladesh achieved almost universal access in primary education. The primary net enrollment rate (NER) is reported at 93 per cent. Enrolment in pre-primary is low at 23 per cent (2009). Primary, lower secondary and secondary education completion have increased over time. Thirty-six per cent of people aged 41-50 in 2010 had completed primary education; whereas that same share among people aged 15-19 is 76 per cent, indicating that the share of primary school completers has more than doubled in 30 years.
l Still, the health and education systems remain challenged on the governance front, particularly in holding civil service employees accountable for performance, and associated with the strong centralisation of authorities and decision making.
Certainly there is no reason for complacency. Bangladesh has achieved the MHD category before (2007 for instance), but later slipped back, due to both methodological changes and a slowdown in progress on human development. The combined effects of the ongoing demographic transition and the growing labour force participation of women are increasing the size and share of working population. Providing quality jobs to new entrants and increasing productivity of the employed population in agriculture and services are major challenges. Accelerated economic growth is a precondition for meeting these challenges. This requires macroeconomic stability, efficient investments in human and physical capital including infrastructure, better and efficient regulation, and well-functioning financial institutions.  At the same time, focused attention is needed on three key elements of economic policy to make economic growth inclusive and sustainable within and across generations: greater investments in building human capital of the poor, prudent use of safety nets, and policies to make growth greener.
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The authors are respectively Lead Economist (Bangladesh) and Country Director (Bangladesh, Bhutan and Nepal) of World Bank.
zhussain@worldbank.org