Beyond the Paycheck: Why Wealth, Not Just Income, Defines Poverty

If disaster struck tomorrow, who would recover faster—someone with savings and assets or someone living paycheck to paycheck?

You would say, the person with savings and assets, of course. Yet global poverty metrics fail to capture this. I have thoughts on why this is, and what can be done to give us a better measurement of poverty. Better measurement can help us improve policies to better support those in living in poverty.

Let’s start with an example.

Faly, a young man with a high school diploma, moves in Madagascar to the capital Antananarivo (Tana) from a rural village, carrying nothing but a backpack and a belief in fresh starts. He rents a small room and survives on his wood smith skills, making an average of $3 a day. By global standards, he is not the poorest — he earns above the World Bank’s $2.15/day extreme poverty line.

Santatra, a young woman, also moves to Tana, but she inherited a house from her late father. Before leaving her village, she invested her savings in a cow, that now generates passive income from milkings. In Tana, she takes short-term cleaning and sewing jobs, also earning $3 a day.

Both are above the international poverty line, yet their financial security is radically different. If faced with a crisis, Faly could lose everything—his job, his home, his stability. Santatra, on the other hand, has assets to fall back on. Yet, according to global poverty indices, they are classified the same way. Should they be?

Why global poverty metrics fall short

The dominant way of measuring poverty relies on income or consumption thresholds, such as the World Bank’s $2.15/day extreme poverty line, which identifies the poorest individuals but doesn’t account for their financial safety nets. Other measurement tools include country national poverty lines, which vary but still rely heavily on income-based measures (UNDP, 2023), and relative poverty measures, such as the European Union’s (EU) definition of poverty (earning below 60% of median income), which reflect inequality but miss out on wealth disparities. These methods capture short-term deprivation but ignore long-term financial security. Faly, despite earning slightly above the poverty line, has no assets or safety net—while Santatra has inherited wealth and investments. In reality, we can see their vulnerabilities are starkly different.

The wealth gap: a missing piece in poverty measurement

Wealth is not just about luxury—it is about resilience. It provides a buffer against shocks like job loss, illness, or inflation. Yet, I’ve found that poverty measures rarely account for it, despite clear evidence of its importance. Wealth inequality is far greater than income inequality. The world’s richest 10% own nearly 76% of global wealth, while the poorest 50% hold just 2%. Wealth determines economic mobility. Studies show that homeownership, land, and savings increase a person’s chances of escaping poverty, even if their income fluctuates. And generational poverty persists without asset accumulation. A child born into a family without land or savings is far more likely to remain in poverty than one with inherited wealth, even if both families earn similar incomes. When excluding wealth, poverty measures underestimate economic hardship and can create misleading statistics about poverty reduction.

The consequences of ignoring wealth in poverty indices

If we ignore “wealth”, the first consequence is simple, we end up with misleading poverty reduction claims. Governments often declare poverty reductions based on rising incomes alone. But does a higher paycheck mean true economic security? Not necessarily. The second consequent, we might end up with poorly designed social policies. When aid programs focus solely on income, they often fail to reach the most vulnerable. Individuals with substantial assets but low reported incomes may still qualify for assistance, while truly struggling individuals without safety nets are overlooked. Lastly, a third consequence is the perpetuation of the cycle of generational poverty. If a family has no land, no savings, and no property, their children start life at a disadvantage, even if they technically earn above the poverty line. Measuring poverty by income alone ignores the role of intergenerational wealth transfer.

Can we measure poverty more accurately?

Some alternatives to the International Poverty Line that attempt to broaden the scope of measurement include The Multidimensional Poverty Index (MPI), which includes indicators related to education, health, and living standards. Another alternative are the hybrid models that consider land ownership, savings, and debt in poverty assessments.

Challenges to incorporating wealth into poverty metrics

Unfortunately, even with all this good work to include wealth in poverty assessments, challenges remain. Unlike income, wealth data is harder to track and varies widely between countries. Another question to ask is how do we quantify informal assets, such as livestock or communal land? And governments may resist wealth-based metrics because they expose deep inequality.

It’s time for a new poverty narrative

If we want to truly fight poverty, we need to move our measurements beyond income and measure wealth. Until we do, we risk underestimating the scale of global inequality and designing policies that will fail the most vulnerable. Poverty is not just about how much you earn—it’s about what you have to fall back on. Until our measurements reflect this reality, I think we are only telling half the story.