This blog post draws on data and research discussed in our entry on Global Extreme Poverty.
According to the International Poverty Line, people are considered to be in ‘extreme poverty’ if they live on less than $1.90 per day, or the equivalent amount after converting currencies and adjusting for price differences between countries. This is the definition used by the World Bank and many other international institutions.
Clearly, $1.90 is a very low threshold, so extreme poverty is, well, extreme.
It is very important that fewer people live in such extreme misery, and thankfully that has happened. Today, about 10% of the world population lives in extreme poverty, while in 1990 the corresponding figure was about 37%. Two centuries ago almost everyone in the world lived in extreme poverty.
But that doesn’t mean that we shouldn’t care about what is happening relative to higher poverty lines. The evidence shows that there is a clear and continuous relationship between material deprivation and subjective well-being, so it would be wrong to celebrate shifting daily incomes from $1.89 to $1.91, even if this shift technically means abruptly reducing extreme poverty. People living on $3, $5, or $10 per day also face substantial hardships, and are still living in poverty.
So, how has poverty changed relative to these higher thresholds?
The short answer is that global poverty rates have also been falling above the $1.90 line. This means that, although much still needs to be done, progress has been real. The historical reductions in global extreme poverty are not merely the result of people moving marginally above some arbitrary misery threshold.
Let’s take a closer look at the evidence.
PovcalNet is a database of consumption and income distributions from all over the world. It is produced and maintained by the World Bank, and it is the most important source of cross-country data to measure poverty.
The main purpose of PovcalNet is to measure global poverty, and accordingly, there are some limitations that follow from the way they produce their data. Importantly: (i) for all countries the top tails of the distributions are unreliable; and (ii) estimates of extreme poverty in rich countries, where PovcalNet uses data from income rather than consumption surveys, are not accurate nor comparable to those in poorer countries.1
Because of these limitations, we can’t really use PovcalNet to study extreme poverty in rich countries, just as we can’t use it to study the incomes of very rich people in any given country.
But we can use it to explore how incomes below, say, 10 dollars per day are changing for most people in the world.
The visualisation below uses PovcalNet data to show the distribution of the world population across different poverty thresholds. This shows a fantastic achievement: Independently of which of the shown thresholds you think should be the appropriate poverty line, the result is the same. The global poverty rate has been falling across all these poverty lines. Indeed, the share of people below any poverty line has declined globally in recent years.
As we can see, more progress has been achieved for the three lowest lines. And this takes us to another important observation: Today, almost two-thirds of the world population live below 10 dollars per day. This explains why, if we want to focus on those who are worst off, we need to use fairly low poverty lines, such as the $1.90 and $3.20 lines employed by the World Bank.2
The next visualization shows the number, rather than the share, of people between the different poverty thresholds. (You can always switch between this and the previous chart by clicking on the visualization and toggling the button labelled ‘relative’.)
Again, this is an encouraging picture. For more than a decade, the number of people living under the three lowest poverty lines has been on the decline. So, independently of which of these poverty lines you choose, not only have poverty rates declined, but the total number of people living in poverty has also fallen.
Obviously, there is still much work to be done. Even 10 dollars per day provides a very low standard of living. But the key message here is that the incomes of those at the bottom are increasing.
The charts above give us an idea of how global poverty is changing. Yet the fortunes of people around the world have changed very differently depending on where they live.
Here, again, we can use PovcalNet’s data to explore the evolution of poverty for particular countries and regions. Below we discuss some countries we found interesting, but you can do your own analysis by clicking on any visualization and selecting the option ‘change country’ at the bottom of the chart.
The case of China is remarkable. As the chart below shows, there has been a dramatic decline in the number of people living in extreme poverty, while at the same time there has been an increase in the number of people living on incomes above $10 a day.
If you switch to the ‘relative’ view, you see that poverty rates have been going down for all of the included poverty lines. In 1981, the entire Chinese population lived below $3.20. Today less than 12% of the population live below this threshold.
If you compare China and India, for example, you can see that while Indians have also made substantial progress, they have seen a slower reduction in poverty, especially at higher thresholds. The case of China is special, but it would be wrong to assume that extreme poverty in the world fell ‘only’ because of China.
Relative to the global average, Sub-Saharan Africa has made much slower progress in reducing poverty. And this is, unfortunately, especially true at higher poverty thresholds.
As the chart below shows, the total number of people living in extreme poverty in Sub-Saharan Africa has been fairly constant in recent years, and it remains higher than it was in 1981. Above extreme poverty, if we look at the $3.20 line, we see that the increase in the number of poor people is even more pronounced.
However, in relative terms, poverty trends in Sub-Saharan Africa are slightly more encouraging: The share of people living below $3.20 has been falling.
Measuring poverty is difficult because it requires making a sharp distinction between those who are and aren’t considered poor. So when we see that global extreme poverty is going down, it is natural to ask ourselves: Are these reductions produced by a definition of ‘extreme’ poverty which is too low?
The evidence discussed above shows that this is not the case. The global poverty rate has been going down in recent years, and this is true independently of whether we set the poverty line at 1.90 or 10 dollars per day.
Of course, high levels of deprivation are unfortunately still very common in most countries, and in many parts of the world we are not making progress. But what is clear is that it is very much possible to reduce poverty.