Tuesday, March 5, 2013

Understanding Urban Poverty

-->
When people think about poverty in Haiti, many times the image that comes to mind is that of a poor farmer gathering his crops to take to market. Though many of Haiti’s poorest live on rural farms, poverty is also quite endemic in the urban areas, and this type of poverty is a completely different beast than rural poverty.

In developing countries like Haiti, the urban economies are composed of two separate labor groups, a formal sector and an informal sector. The formal labor sector is made up of professional jobs that we have in the US, doctors, lawyers, business professionals, police officers, construction workers, factory workers, teachers, etc. In many Haitian cities, this formal sector is principally composed of factory laborers. These jobs are relatively well paying and offer consistent work and consistent pay. This type of labor force is not too difficult to understand because it’s what most Americans are apart of. Most of us have a job we go to on a regular basis, and we receive a predefined salary for our work. The salary may vary those paid on commission, but our output always has a predetermined salary.

The second sector in Haitian cities (and most cities in most developing countries), the informal sector, is a bit different than anything we see in the US. The informal sector is made up of jobs with no predefined salary and no predefined work agreement. The people in these jobs are not hired for the jobs, nor do they work for a specific firm; rather they act as individual agents looking for any remunerative task the city might offer. As you exit the Port Au Prince Airport, there are about fifty guys who come up to you and offer to take your luggage to your car. They are pretty aggressive and won’t stop hassling you until you walk away from them or someone else comes up. A few months ago when I was flying back to the US, one of these guys grabbed my bags without me asking, and then demanded I pay him twenty dollars. When I handed him five, he tried to grab my wallet. These guys are all in the informal labor sector. They are basically low skilled workers looking for a situation where they could make a little bit of money. These jobs are not too common in the US; the best example of an informal labor sector we see at home would be a few guys outside of a Home Depot or a Lowes looking to do some construction work for that day. The informal laborers basically sit in highly populated areas looking for something they can do to get paid. In the L’Estere market where we buy the goats, there are always guys hanging around the people selling goats, and will offer to walk your goats back to your car. They do this without any predetermined salary, but they hope they will get a tip when they’re done. There is no contract enforcing this agreement though, so there is no guarantee they will get paid. This is the sector of the urban economy where urban poverty exists. Some of these informal laborers add value to the city, like the guys who help us take our goats back to the car, but some of these informal laborers can be destructive to the overall economy. In some cities laborers in the informal sector will work as pickpockets or beggars. Though these jobs don’t really add value to the city, they can provide an income. In very unfortunate circumstances, children will go to the cities looking for work, and will join gangs to find money.

In countries like Haiti, where most of the population is located in the rural areas, regulating urban poverty is difficult. People will migrate from the rural farms to the urban areas if they think they can make more money in the urban areas than they are currently making in the rural areas. If the average expected wage in the urban areas is greater than the average wage in the rural areas, people will move to the urban areas. The problem with this, is that the majority of jobs in the urban areas are in the informal sector, which pay less than the average rural sector. So even if there are good jobs available in the urban sector, not everyone who migrates to the urban areas will get those jobs. Some people will get good work in the formal sector, while others will get shafted into a crumby job in the informal sector.

This is difficult to understand on a theoretical level, so an example might help. Lets say the American government lifted the sugar tariffs on foreign sugar. This means Haitian sugarcane just would become more profitable. Cane refineries begin to open up in Gonaives (the port town ten miles north of La Croix), and the average wage of a Haitian factory worker in Gonaives would increase. For this example, lets assume the average wage of a factory worker in Gonaives triples. Now an increase in factory wages in Gonaives will increase the wages in Gonaives’s formal sector. Because the expected urban wage is made up of both the formal and informal sectors, the new sugar cane refineries in Gonaives will give people in the rural areas an incentive to migrate to Gonaives. The migration will be uneven; not everyone who moves there will profit from the new opportunities there. There will be more people migrating to Gonaives than the sugarcane refineries can employ. Everyone will come to Gonaives hoping to get a good job at the sugar cane refinery, but not everyone will. Those who don’t find work at the sugarcane refineries will then work in the informal sector. Some people might go back home to the rural areas, but most people will probably stick around hoping to work at the sugar cane refinery. Formal sector jobs are generally very good jobs and most people who migrate to the cities intend to stay there for a while, looking for that formal sector job. While they wait they have to work, so they will work in the informal sector, and remain in poverty.

This is counterintuitive, because it asserts that a rising tide in the urban areas does not lift all boats. A new sugarcane refinery should decrease urban poverty, but it ends up increasing urban poverty because it pulls more people from the rural areas than can be employed at the new refineries. This is one of the reasons that some NGOs in Port Au Prince are doing more harm than good after the 2010 earthquake. Before earthquake, Port Au Prince had some really good formal sector jobs. After the earthquake, many of those jobs crumbled away, quite literally in some cases. Because the formal sector disappeared almost instantly, there was a huge swell in the informal sector. People who worked in factories that were demolished in the quake, now had to work as bag carriers outside of the airport. After the earthquake many NGOs came and tried to redevelop the formal sector jobs that were lost in the earthquake. This was helpful for the handful of people who got the formal sector jobs in the cities, but it also maintained the huge informal labor sector initially created by the earthquake. Those people occupying the informal labor sector are the ones currently living in the squalid tent cities around Port Au Prince. They have not returned back to the rural areas because they are hoping to get one of the formal sector jobs. This is one of the reasons, that even three years after the earthquake, there are still massive tent cities outside of Port Au Prince. All those people are hoping to get jobs in formal sector, but in the mean time they are making ends meet by working in the informal sector. What might have been a more productive development initiative after the earthquake would have been to not focus on the jobs that were lost in the cities, but focus on developing the rural areas. This way there would have been a reverse migration back to the rural areas. Those working in the informal sector in the big cities would return to the rural areas because the wages there were increasing. Though this would have not rebuilt the big cities, it would have decreased the overall level of urban poverty.

I do not mean to place the blame for the tent cities solely on the NGOs. Though there are some NGOs in Port Au Prince that are creating more problems than solutions, there are also many that are doing very good work. The issues surrounding tent cities are very complicated, but urban to rural migration is a useful way to examine the incentives of the situation and explain why the tent cities are still so prevalent three years after the earthquake. This is one of the many complexities of development work. Sometimes the solution to a massive problem lies totally outside of the problem. Sometimes the best way to help the urban poor is to build up the rural areas. Though this is counterintuitive, it can be a useful guide as we try to figure out how to help Haiti. 

No comments:

Post a Comment