Statistics on Poverty and Absolute Income Levels

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

First the total numbers: 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. One in 6 people, or 17% of humanity, are still poor. Most of the decline happened in China:

global poverty decline

(source)

number of poor people

(source)

Here’s animated representation of those numbers and how they evolved over the years (including forecasts):

one dollar a day

(source)

Here’s a similar image based on income:

world income distribution

And a more statistically correct version of that graph (based on yearly instead of daily income):

world income distribution

(source)

You can see the same evolution of a camel shaped distribution to a dromedary shaped distribution.

For comparison: the median person in the world today (give or take, the 3,564,000,000th person) lives on about $1,225 a year or $3.3 a day. Many of the poorest 5 percent of Americans are still living on more than that—on average around $3,000 to 4,000 per capita per year; or about $10 a day. Only the richest 5 percent of people in India live on the same amount. (source)

Relatively speaking, the drop in the number of people living in absolute poverty over the last decades is all the more remarkable given the global population increase over the same period. The poverty rate as the proportion of poor people in the world dropped from 43.1% in 1990 to 20.6% in 2010. So the percentage 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 sixth. 18 percent of Filipinos live under $1.25 per day. That’s roughly 17 million people. 40 percent of Filipinos live on less than $2 per day.

It would cost $66 billion to get everyone on the planet out of extreme poverty – this amount is 4% of global military spending (source).

numbers below $1.25 poverty line

The most recent data:

world poverty 2010

(source)

Here are some forecasts:

Poverty Scenarios forecasts

A comparison between two years:

people living on less than one dollar a day, numbers and percentages

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

global poverty rate trend

(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).

Recently, there has been another update of the PPP figures, which could have implications for the poverty rate in the near future.

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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:

population growth and poverty reduction

(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):

geographical breakdown of poverty numbers

(source)

poverty $1 $2

(source)

poverty china india africa

(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):

global poverty 2005 2015

(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:

poverty in East Asia

(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:

poverty in South Asia

(source)

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

poverty in Sub Saharan Africa

(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.

one dollar a day poverty rate
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:

world gini coefficient from 1970 to 2006

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:

poverty US$0-US$4 a day

(source)

Around five billion people live under $10 per day.

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6. International v. national poverty lines

Most countries have established their own poverty lines, independent from the World Bank line. The official poverty line in the US today is $15-$20 (depending on household size) a day; in the European Union countries it’s closer to $30 a day (where it is defined as 0.6 of median income, explicitly recognizing that poverty is relative). In Latin America, country poverty lines range from $3 to $8 a day (source). Naturally, richer countries tend to have a higher poverty line:

poverty lines across the world

(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:

national poverty lines versus world bank poverty 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.

national vs international poverty line

(source)
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