Statistics on Poverty and Absolute Income Levels

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Content

1. Total numbers and percentages of people living in absolute poverty
2. Population growth and poverty reduction
3. Geographical breakdown of the numbers and percentages of people living in absolute poverty
4. Alternative numbers
5. A wider definition of poverty
6. International v. national poverty lines

1. Total numbers and percentages of people living in absolute poverty

Using the internationally accepted World Bank poverty threshold of $1.25 a day, around 1.200 million people lived in extreme poverty in 2010; that’s down from 1,9 billion in 1990.

Given the global population increase over the same period, this drop in the number of people living in absolute poverty is all the more remarkable. It means that the poverty rate as a proportion of all humanity dropped even more quickly: from 43.1% in 1990 to 20.6% in 2010. So the % of people living in absolute poverty has been cut in half over the last 20 years. More than 75% of the world’s population lived on less than $1 a day in 1820. Today, almost no one does in the West. In China it’s less then 20%, in South Asia 40%, in Africa half. Globally, it’s about a fifth. It would cost $66 billion to get everyone on the planet out of extreme poverty – this amount is 4% of global military spending (source).

That means that Millennium Development Goal 1a was achieved around 2008, 6 to 7 years earlier than expected:

(source, MDG1a is short for Millennium Development Goal 1a)

The World Bank database on poverty is here. A methodological note: the World Bank numbers depend heavily on PPP. $1 does not buy the same amount of goods and services in the US as it does in Ghana. Hence, incomes and consumption levels must be corrected so as to achieve Purchasing Power Parity. The PPP comparisons are adjusted over time. With each new PPP round, the international poverty line has been updated (from $1.02 in 195 prices to $1.08 in 1993 prices, which was used for the first MDG target, to $1.25 in 2005 prices). In the case of the last update, both the country sample of national poverty lines to estimate the international poverty line, as well as the PPPs, was changed. After updating the line, the entire time series of poverty measurement is then changed (going all the way to 1981), using the new poverty line and the new PPP exchange rates. As has been noted by many this update led to a substantial upward revision of the number and share of poor people in the developing world (from around 29 per cent in 1990 using the $1.08 line, to 41 per cent in 1990 using the $1.25 line, with similar discrepancies in other years).

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2. Population growth and poverty reduction

The fact that global population growth and poverty reduction went hand in hand is contrary to some predictions. According to Malthus and his followers, population growth that exceeds a certain pace will inevitably hit a resource ceiling, and will result in decreasing standards of living, poverty, conflict over scarce resources, famine etc. This is called a Malthusian catastrophe. Ultimately, population growth will halt because of this, and population levels will return to the “normal” equilibrium possible within the limits offered by nature (the so-called “carrying capacity”). The data, however, show that this is too simplistic and certainly not applicable to the modern world. In fact, over the last centuries, population growth hasn’t led to scarcity, on the contrary:

(source)

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3. Geographical breakdown of the numbers and percentages of people living in absolute poverty

Here a geographic breakdown of the estimates cited above (in numbers of people):

(source)

(source)

(source)

Most progress has occurred in China. China has taken 660m people out of poverty since the early 1980s. The share of the Chinese population getting by on $1.25 a day, or less, fell from 77% in the early 80s to 14% in 2008.

The regional numbers presented in another way, with a projection for 2015 (in numbers of people):

(source)

As you can see, most of the global reduction in poverty is indeed concentrated in China. The graph below is for East Asia, but that’s primarily China:

(source)

Again, this graph shows that population growth doesn’t necessarily produce poverty; on the contrary.

South Asia as well - which includes India, Pakistan, and Bangladesh – saw reductions in poverty, although less substantial:

(source)

Sub-Saharan Africa also saw some reductions, although again less substantial ones:

(source)

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4. Alternative numbers

There’s also this interesting study, which has some different calculations giving an even more optimistic account:

World poverty is falling. Between 1970 and 2006, the global poverty rate has been cut by nearly three quarters. The percentage of the world population living on less than $1 a day (in PPP-adjusted 2000 dollars) went from 26.8% in 1970 to 5.4% in 2006.

And this is notwithstanding an increase of world population by 80% over the same time. The decrease in poverty rates is mostly driven by China.

The study also estimates relative poverty, not only absolute poverty, or – in other words – income inequality, which is also decreasing:

This is despite rising inequality in countries such as the U.S. (see here, here, and here). More on the Gini coefficient here.

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5. A wider definition of poverty

There is some concern that the 1 dollar a day threshold is too low in the sense that the amount can’t cover all necessities. Hence you often see $2 or even $4 dollar thresholds:

(source)

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6. International v. national poverty lines

Most countries have established their own poverty lines, independent from the World Bank line. Naturally, richer countries tend to have a higher poverty line:

 

(source)

Some of these poverty lines are relative poverty lines (e.g. 50% of median income). Absolute lines aim to measure the cost of certain “basic needs,” which are often interpreted as physiological minima for human survival; nutritional requirements for good health and normal activity levels are widely used to anchor absolute lines. By contrast, relative lines do not claim to represent physiological minima and are instead (typically) set at a constant proportion of current mean income or consumption. Absolute lines are common in developing countries while relative lines tend to dominate in developed countries (source).

The graphs above also have an interesting horizontal axis. The mean line for the poorest 15 countries in terms of consumption per capita is $1.25 while the mean for the richest 15 is $25 a day. Combining the x and y axes, one sees that national lines rise with mean consumption.

Here’s how national poverty lines differ from the World Bank $1 a day line:

(source)

Globally, 1.5 billion people live in poverty as defined within their own countries. Most countries use a poverty line that is higher, sometimes (especially in the case of developed countries) much higher than the World Bank poverty line.

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