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publication Mar 26, 2020

Mongolia Poverty Update

The new joint report by the National Statistics Office of Mongolia (NSO) and the World Bank, “Mongolia Poverty Update”, provides the latest analysis on poverty trends and people’s profiles in Mongolia based on the 2018 Household Socio-Economic Survey. It also highlights the challenges and opportunities to tackle poverty going forward.

Key poverty outcomes

The national poverty rate fell slightly from 29.6 percent in 2016 to 28.4 percent in 2018. A further 15 percent of the total population is clustered just above the national poverty line, risking to slip into poverty in an event of any unanticipated shocks.

Despite robust economic growth, Mongolia is struggling to translate the benefits of growth into household-level welfare, especially for the poor. Many of the poor, in particular low-skilled wage workers, are missing out on the benefits from the recent capital-intensive mining sector-led growth.

Between 2016 and 2018, poverty reduction was uneven, declining in rural but not in urban areas. Growth in rural areas was faster and favorable to the poor, contributing to reducing rural poverty by 4 percentage points from 34.9 percent in 2016 to 30.8 percent in 2018. By contrast, less-inclusive consumption growth in urban areas was accompanied by stagnation in poverty, leaving the poverty rate unchanged at 27 percent from 2016 to 2018. The lack of progress in poverty reduction in urban areas was mainly driven by stagnant wage growth in the poorest population group, while strong growth in farm income supported by rising livestock prices, together with the expansion of poverty-targeted social protection programs, contributed to robust poverty reduction in rural areas.

Consequently, poverty is increasingly concentrated in urban areas. Although the incidence of poverty is still higher in rural areas (30.8 percent) than in urban areas (27.2 percent), with two-thirds of the population living in urban areas, more than six out of ten poor people now live in urban areas.

Who are the poor?

Poverty is most prevalent among young children. Two in five poor people in Mongolia are children under the age of 15.  Poverty is highly associated with the number of children and dependency ratio, reflecting the inadequate number of income earners to support the children at home.

Among the working-age population (aged 15+), the unemployed and economically inactive people are the poorest. The poor, with low levels of human capital, are unlikely to be able to meet the labor market needs for better-paying jobs and often face difficulties in finding a job, hence poverty headcount rates for the unemployed and inactive population are 40 and 34 percent respectively, significantly higher than for those employed. Among the employed population, three in five poor workers were engaged in wage activities, which are mostly low-skilled and low-end service jobs.

Herders were among the poorest in 2010, but now only one in three herders are estimated to be poor. Increasing livestock product demand and prices, better connectivity to markets, more wage employment opportunities, government’s subsidies and transfers have contributed to improving herders’ wellbeing. Yet, their livelihoods, highly dependent on livestock, are still extremely vulnerable to unexpected shocks including livestock price fluctuations and natural disasters. The recent acceleration of pastural degradation could also negatively affect the sustainability of herders’ livestock activities and welfare.

Mongolia’s education attainment level, particularly among the youth, is the highest in the region, yet poverty is still highly associated with the education level. The majority of poor people leave school at or below the upper secondary level and only one out of ten complete university or equivalent education, while nearly half of the population in the top 20 has a university.

What are the challenges and opportunities to reducing poverty?

Important challenges remain in service delivery, particularly with regards to proper sanitation and reliable heating source. Wide disparities in the access to basic services remain among ger dwellers. In 2018, seven in ten poor people lacked access to one of the basic infrastructure services (improved drinking water, sanitation or sustainable heating source).

Seventy percent of young women (aged 25-29) have completed tertiary education but for women, having a university diploma does not necessarily translate into a better-paying job. 46 percent of working-age women are still economically inactive and female labor force participation has barely improved over the last decade while men’s labor force participation rate reached a historical high of 70 percent in 2018. The gender gap in the labor force participation rate has been persistent and widening for the last couple of years.

With one-third of the total population being children, Mongolia is welcoming a “demographic dividend” in the coming years. As more youth enter the labor force, the country will need to create enough jobs not only in the capital-intensive mining sector but in a wide variety of productive sectors. At the same time, investing in children and youth to improve their skills is crucial as is promotion of fair and equitable labor force participation for females.