This is the second blog in a series about how countries can correct course and make progress in global poverty reduction. For more information on the topic, read the 2022 Poverty and Shared Prosperity Report.
648 million people in the world, about eight percent of the global population, live in extreme poverty, which means they subsist on less than US$2.15 per day. This is the current international poverty line (IPL), the World Bank’s most widely reported measure of global poverty that reflects the median of poverty lines in low-income countries (LICs). However, — which could easily lead to underestimating the share of the population living in poverty.
For this reason, the World Bank also reports global poverty numbers at two higher poverty lines to help monitor poverty as countries grow and living standards improve. These two thresholds — typical of poverty lines among lower-middle-income countries (LMICs) and upper-middle-income countries (UMICs) — are currently at US$3.65 and US$6.85, respectively.
All poverty lines were updated earlier this year following the release of the 2017 purchasing power parities (PPPs) — the main data used to convert different currencies into a common, comparable unit and account for price differences across countries.
In 2019, many more people lived in poverty at these higher poverty lines than at the extreme poverty line. Almost a quarter of the global population, 23 percent, lived below the US$3.65 poverty line, and almost half, 47 percent, lived below the US$6.85 poverty line, as reported in the 2022 Poverty and Shared Prosperity report. This also means that the global median income (US$7.60 per person per day) is very close to the UMIC line.
These different levels of poverty rates show that, while the three measures do not appear to differ considerably in terms of the absolute wellbeing they capture, poverty estimates change starkly as we move up to higher values of the poverty line. The global poverty rate at the UMIC line is six times higher than at the extreme poverty rate, but the US$6.85 line is just three times higher than the IPL, for example.
These absolute poverty lines represent a basic floor in economic wellbeing for LICs and MICs. The fact that half of the global population is still poor under any of these definitions is of great concern for poverty reduction efforts over the coming decade.
Despite these differences in levels, trends in poverty reduction look similar at the three poverty lines — and run almost parallel for the period between 1990 and 2014, as shown in Figure 1. However, the slowdown in poverty reduction registered at the US$2.15 poverty line after 2014 was not observed at the US$3.65 and US$6.85 poverty lines.
Figure 2 shows these changes at the three lines between 1990 and 2019.
In 1990, the distribution of the global poor at the three lines was very similar: East Asia and the Pacific accounted for roughly half of the global population living in poverty at any of the three poverty lines (US$2.15, US$3.65, US$6.85). South Asia followed with about 30 percent of the global poor, and Sub-Saharan Africa accounted for another 10 to 15 percent.
Moving forward to 2019, the poverty estimates confirm both a change in the regional distribution of the global poor and a different regional profile at the three poverty lines. The extreme poor are concentrated in Sub-Saharan Africa — 60 percent of the global poor live in the region, while East Asia and the Pacific only accounts for 3 percent of the people living on less than US$2.15 per day – this confirms incredible progress in poverty reduction in the region.
While the population of extreme poor has declined significantly in South Asia — from 563 million in 1990 to 156 million in 2019 — the region still accounts for 24 percent of the extreme poor in 2019, similar to its share of the global poor in 1990 (28 percent).
While extreme poverty is concentrated in Sub-Saharan Africa, this is not the case at higher values of the poverty line. In fact, South Asia has the highest share of the global poor at the higher poverty lines (43 percent at US$3.65 and 42 percent at US$6.85). The share of the global poor who live in the East Asia and Pacific region is also significant, at the US$6.85 poverty line: 19 percent in 2019, but considerably lower than before.
As countries grow, what is understood to be the basic cost to participate in society increases. Expressing poverty estimates at different poverty lines is one way to capture this effect by using different absolute thresholds.
Another way is to use the World Bank’s Societal Poverty Line (SPL), a poverty measure that varies with each country’s national income. This measure was introduced in 2018 and is defined as max (US$2.15, US$1.15 + 0.5*Median). The SPL combines absolute and relative notions of poverty: it has a floor of US$2.15 at the IPL, which applies to countries with a median income of less than US$2 per person per day, as in the case of a low-income country like Malawi (median consumption per person per day in 2019 of US$1.53). Above this income level, the poverty line is set as US$1.15 plus half the national median.
Globally, just over a quarter of the world’s population lived in societal poverty in 2019 (Figure 1), not too different from the poverty rate at the US$3.65 line. Or, put differently, the poverty rate at the US$6.85 poverty line is almost double the societal poverty rate. This means that, for many middle-income countries, the US$6.85 line far exceeds the societal poverty line.
For example, 91 percent of the population in Nigeria lived on less than US$6.85 per person per day in 2018. For the same year, 43 percent of the population lived below an SPL of US$2.6. The opposite happens in a high-income country such as Germany, where 0.2% of the population lived on less than US$6.85 and 12% lived below a societal poverty line of US$29 in 2018. It is important to note that poverty estimates for Nigeria are based on a consumption measure, while Germany uses income.
: as countries grow, their poverty line is automatically adjusted upward.
Does this mean that nothing can be done to reduce societal poverty?
The answer is no.. In this sense, the relative component of the societal poverty measure is very closely related to a measure of inequality.
The authors gratefully acknowledge financial support from the UK Government through the Data and Evidence for Tackling Extreme Poverty (DEEP) Research Program.