This paper seeks to analyse a remarkable change that has occurred in the structure of labour force in Rural Bangladesh and to relate this change to the recent trends in poverty. The size of non-farm labour-force has increased dramatically in the Post-independence period. Such a shift is normally associated with growing prosperity, and there are also some independent estimates which indicate that poverty may be on the decline. This paper contests the validity of these estimates of poverty, and also argues that the shift towards non-farm activities is more a sign of pathology than health in the present context of Bangladesh. The structural change merely reflects a relocation of surplus labour from the farm to the non-farm sector. 

The paper investigates the robustness of some official estimates which show a dramatic decline in poverty in Bangladesh in the 1980s. HES data of the Bangladesh Bureau of Statistics shows a real per capita consumption growth rate of 9.9% per annum from 1981/82 to 1985/86. But, the paper estimates the growth rate of per capital real consumption to be only 0.5% per annum based on National Accounts (NA) data. The rate of growth of real consumption per capita based on HES data appears to be highly exaggerated. It true, it would be the highest rate of per capita real consumption growth for any country in the world during this period.  Three alternative measures of poverty belonging to the FGT class of additively decomposable poverty measures are used in the analysis. The results show that an implied growth rate of 0.5% per year in real per capita consumption is the much more plausible estimate of the true rate. Assessments of growth during the 1980s consistent with national accounts data suggest that the proportion of poor population has remained fairly stable in recent years while absolute numbers of poor have increased. The paper shows that the growth rate of real consumption per capita has to be at least equal to the rate of population growth before the absolute number of poor can start to decline appreciably without a shift in relative inequalities. Further, measures of poverty particularly those that give more weight to the poorest of the poor, and those that use a lower poverty line would reveal greater proportionate impacts of expected economic growth in Bangladesh.

Bangladesh agriculture experienced a reasonably rapid rate of growth during the post-independence period. Analysis of changes in real income and wages shows that such a growth had little impact on the distribution of income or alleviating poverty in the rural areas. In fact, this paper argues that in Bangladesh agriculture inequality in the distribution income, produced by the interaction among institutional, technological and demographic factors has made it impossible either to alleviate poverty or to permit sustained growth towards self-sufficiency.Unequal distribution of income limiting the internal demand for foodgrain is the critical constraint faced by Bangladesh agriculture rather than absence of appropriate technology or shortfall in required investment. Theoretically, adequate growth in internal demand for rice could be ensured under several alternative scenarios in an economy such as Bangladesh. On closer scrutiny none of them seemed feasible. On the other hand, producing crops for meeting external demand and thereby overcoming demand constraint on growth might have adverse repercussions on the incidence of rural poverty through its unfavourable effect on food prices and real wages. Under these circumstances it is argued that the burden of poverty alleviation would have to be borne either by growth in the non-agricultural sector or by directly redistributive measures in agriculture or by a combination of both.

This paper addresses some important issues relating to the concept, measurement and monitoring of poverty. Poverty measures based on income fractiles is inadequate because it fails to capture the differences in household characteristic (i.e., size of the household, children-adult distribution etc.). Income per adult equivalent can be looked upon as an ideal measure in these respects, but its use is constrained by data availability. Another problem with the income fractile measure is that income flow is less stable relative to consumption flow and the duration of one’s stay in a particular fractile and the direction of interfractile mobility are ignored. Moreover, one has to differentiate between life cycle poverty and life-long-poverty. About absolute/relative debate in the conceptualization of poverty, it is argued that although some of the inequality concerns have implications for poverty, it should not be overstretched. Rising income may, contrary to expectation, cause absolute poverty by changing the capability space or by changing the commodity space itself. A six step procedure is proposed to construct a more meaningful measure of poverty. Life expectancy as an integrating concept is endorsed as more promising than PQLI which is at best a measure of the quantity of life not its quality. A set of monitoring indicators are suggested keeping in mind the problem of data constraints. The institutional requirements of monitoring are discussed keeping both donor’s and recipients perceptions in mind and some alternative institutional mechanisms are proposed.