Poverty in Albania is a multidimensional phenomenon. As indicated by various studies, poverty defined in terms of low income and/or consumption in Albania is relatively high, mainly due to limited job opportunities and low incomes, particularly in agriculture. But poverty in Albania not only manifests itself in low income for part of the population, but also importantly in limited access to and poor quality of basic services like education, health, water, and sewerage. Large differences exist between rural and urban areas. Furthermore, repeated shocks and crisis, as well as large external and internal migration have contributed to the weakening of social cohesion and traditional family and community based safety nets, leading to increased vulnerability and social exclusion of different groups of the population.

Albania ranks low in comparison with other Southeastern and Central European transition countries in terms of commonly used living standard and human development indicators. Per capita GDP in Albania is lower than the average for Southeastern European transition countries, and significantly below the average for Central European transition countries. UNDP's human development index places Albania 100^th (based on 1997 data) out of 174 countries ranked, significantly below the rankings for other transition countries in Southeastern (55-73) and Central Europe (33-47). UNICEF’s Report on the State of the World’s Children for the year 2000 ranks Albania 90^th out of 175 countries with respect to under-five mortality rate (based on 1998 data).

A study based on the 1996 Living Standard Measurement Survey (LSMS) data, conducted in the areas outside Tirana, suggests that poverty in Albania is a rural phenomenon with almost 90 percent of the poor residing in rural areas and 60 percent of the heads of poor households being self-employed in agriculture. The incidence of rural poverty was found to be five times higher than urban poverty and is highest in the North of Albania, where a large portion of families own less than 0.5 hectare of land each. Many households in these regions require subsidized wheat and cash transfers to survive the winter. Limited access to public services, often aggravated by poor rural infrastructure, especially roads, is a contributing factor to rural poverty. According to 1998 data, 27 percent of farms do not sell products to market and only 50 percent of farms use machinery.

Children are especially at risk of poverty according to the results of the 1996 LSMS data. The poverty rate for children under 6 was found to be almost double that for adults 64 and over. Moreover, the number of children is a strong poverty correlate – approximately one third of the poor have 5 or more children and the poverty incidence among families with five or more children is 60 percent.

Other results of the LSMS study indicate that poor families tend to be young, that poverty is strongly linked to education, while gender does not appear to be a poverty correlate, and that remittances constitute a major informal safety net. The poverty rate drops as the age of a household head rises; poverty is almost 10 percent higher for households with heads 16 to 35 years of age than for households with heads aged 64 and above. Households headed by people who are illiterate or have basic education are 20-30 times more likely to be poor than households headed by university graduates. Especially in rural areas, the poverty rate is minimal where household heads have migrated and returned home; the poverty rate is slightly higher where household heads abroad are currently sending remittances.

The social stratification since the 1996 LSMS may have changed as a result of the economic downfall caused by the pyramid scheme crisis, and large-scale internal and external migration. There are indications that significant pockets of urban poverty have appeared. Slum-like communities have formed around Tirana and other major cities, lacking urban infrastructure and services. Children from these communities often have to walk for about an hour to reach school. It is estimated that in Tirana there are about 800 street children. Parents working abroad often leave their children with grandparents or relatives who in some cases are not able to take adequate care of them. The number of elderly living alone and without help has risen. Problems such as drug abuse, prostitution, trafficking in women, child abuse, and other social problems have also increased.

Access to health services in Albania is limited and services tend to be of poor quality. Budgetary spending on health in Albania (2.1 percent of GDP in 1999) is one of the lowest in the region and since 1990 has fallen significantly in real terms. Currently, 30 percent of existing health centers are not functioning due to a variety of reasons. Albania has fewer physicians and nurses than other countries in the region. Large rehabilitation needs still exist for the physical infrastructure. Informal payments for health services which are supposed to be free are a common phenomenon. Albania compares unfavorably with other countries in the region with respect to infant and maternal mortality rates. In contrast, both male and female life expectancy in Albania are high, notwithstanding the fact that they seem to have fallen since 1991 (Tables 1 and 2, Appendix C). Available evidence indicates that in north-eastern areas of the country malnutrition is present in around one quarter of children.

Enrollment rates in education, particularly at the secondary level and especially for children from rural areas have fallen since 1990 (Table 3, Appendix C). As a result, the expected duration of schooling of children has dropped to below 10 years. This drop occurred against the background of a decline in public expenditures on education from 3.8 percent of GDP in 1995 to 2.8 percent of GDP in 1999, much below the level in neighboring countries. The declining enrollment rates reflect a deterioration in the quality of education, the diminishing relevance of traditional forms of vocational and technical training, as well as the increased opportunity costs of attending school. During the last ten years about 3 percent of children have dropped out of school each year, which means that illiteracy which had been virtually eradicated in Albania, could be rising again. There are also serious concerns about the quality of education. In some urban areas the number of pupils per classroom now exceeds 40, while especially in rural areas the percentage of unqualified teachers is quite high. In addition, many schools still are in poor condition (leaking roofs, missing windows, no heat).

Access to basic services is far from universal and services are often not reliable. In urban areas about 80 percent of the population have access to piped water, access levels in rural areas are considerable lower. Furthermore, an urban household on average has running water for only 2-3 hours a day. About 40 percent of the urban population has a sewerage connection. No sewerage treatment facility exists in the whole country, and sewerage is discarded directly into rivers, lakes and the sea. Because of the poor condition of existing pipes, sewerage often contaminates drinking water. Because of the obvious health risks, a high chlorine concentration is used to kill bacteria in piped water. Access levels for electricity are high, but there are frequent disruptions in the service, especially during the winter months.