Dear Editor,
A heated debate is taking place regarding an overall poverty rate of 58 per cent and absolute poverty of 32 per cent in Guyana. These numbers emerge from an IDB study using the Labour Force Survey, which was conducted in 2021 by the Bureau of Statistics. Readers will recall that 2021 was at the height of the pandemic, and there was a major collapse of incomes in Guyana and across the world.
Even though enclave oil production started two years before, the non-oil sectors were adversely affected by the pandemic. Hence, there would have been job losses and therefore higher poverty in that year. Remittances would have also declined, thereby accounting for lower overall income in 2021. Yes, the IDB added remittances to income in the Labour Force Survey. The pandemic also pushed many (11 per cent of formal workers) into the informal economy, where incomes are significantly lower.
Therefore, the high poverty rate from the 2021 survey must be seen as a state of transitory poverty, making the number not very useful for analysis and guidance. I am certain from my observations that poverty is lower in 2025, but it is not eliminated. Maybe it never will. We could probably get to the philosophy in a later instalment.
The IDB study uses the income-based measure of poverty. However, we know there is a tendency for people to understate their incomes in surveys. It is for this reason that others use consumption-based poverty. There are also good economic reasons for using consumption-based poverty measures. For example, the principle of consumption smoothing tells us what true deprivation is despite income fluctuations. Consumption is usually a better measure of deprivation relative to income because people usually understate the latter in surveys.
The World Bank uses multi-dimensional poverty (MDP) to better define poverty beyond income. MDP looks at deprivations in terms of limited nutrition, child mortality, years of schooling, housing, cooking fuel, drinking water, and others. According to the World Bank, 6.5 per cent of Guyana’s population was vulnerable to multidimensional poverty in 2019, a full year before the pandemic peak.
Staying with income for a moment, another study by the World Bank determines the income-based poverty rate was 48 per cent in 2019, a rate that declined from 61 per cent in 2006. Readers would recall that in 2006 Guyana was still amid its most intense post-independence civil conflict engineered by a combination of political and underground sub-state actors (the descendants of whom might be in Parliament today). Then there was a subset who were likely burning down their buildings for insurance claims. The income-based poverty rate was 83.5 per cent in 1992.
We also know that the Venezuelan migrant workers are the most vulnerable ones to emigrate to Guyana, about 28,000 by 2021, according to one migration study. The relatively well-off Venezuelans migrate to Costa Rica, Spain, Canada, Panama and other high-income countries. The migration study showed that 75 per cent of these vulnerable workers work in informal sectors in Guyana, earning very low pay but not benefiting from Government transfers. These migrants also do not have deep diaspora networks to provide some remittances. These factors would have contributed to the high income-based poverty measure in 2021. These folks should be regularised into the Guyanese formal labour force so that they can pay taxes and enhance the sustainability of NIS. This is a great opportunity for Guyana. Simple economics tells us that labour force growth generates long-term structural growth, not cyclical growth.
Editor, Guyana still has high poverty, especially in the rural areas, but deprivations are significantly lower compared with when I was a teenager in the 1990s. The question the country faces is how to optimally utilise oil revenues for building human capital and solving social leakages (eg, the minibus tout culture, dumping garbage in the canals, clearing of mangroves in the hope of chasing away mosquitos, loud music, rum shop proliferation in new and old housing areas, mechanics and workshops in new housing areas, and many others).
How to build climate-resilient housing? Are GOAL scholarships the best use of funds? How to sustain the University of Guyana and make it expand? Should tuition be free at UG? You cannot have good faculty pay, attract foreign students (a potentially great source of foreign exchange), have beautiful buildings and green spaces on campus, labs, computer facilities, and all the software with free tuition. The oil revenues are simply not enough (although a blessing). It never will be enough because all the foreign investors have a shareholder wealth maximisation objective. The challenge is to align Guyana’s developmental objectives with the revenues received after the multinational corporations’ shareholders get their cut. There is also not a better model. And all the talk of renegotiation is just that: talk!
The constraint Guyana faces is it must continually spend just to maintain its infrastructure to stay above water; then it can think about building new infrastructure, paying for public service wages, paying for social transfers, funding education and healthcare, funding new airports, funding new deep-water harbours, and so on.