Since 1990, the World Bank has tracked extreme poverty around the world using an international poverty line, often referred to as the extreme poverty line. Ending poverty under this line, currently set at $3 per person per day in 2021 prices, has long been integral to the mission of the World Bank and it underpins the first target of the Sustainable Development Goals.
Using the extreme poverty line, global progress has been historic. The share of the global population in extreme poverty has fallen from 43% in 1990 to 10% today. Countries that used to have double-digit extreme poverty rates, like China, India, Indonesia, and Brazil, now stand at 4% or lower, and more than one hundred economies worldwide have extreme poverty rates below 1%.
This massive success has led many to ask: do we still need this extreme poverty line? Prominent scholars have debated abandoning or ending the use of the line. Two recent proposals suggest supplementing the line with a threshold 10 times or 15 times higher.
In this blog, we will provide three reasons why the extreme poverty line remains a highly relevant goalpost. Our point is not to argue for a line exactly at $3 – any poverty line involves some amount of arbitrariness and uncertainty. Rather, we will argue that there is value to having a poverty line that, at face value, appears extremely low to many in the Global North.
Before diving into the reasons, because few people think in daily, per-capita budgets in 2021 prices, let us translate the international poverty line into more relatable terms. For a six-person family—the typical household size for those in extreme poverty— in 2026 prices, the international poverty line comes to $675 per month ($8,100 per year). Most countries measure poverty by consumption, whereby the six-person household would be considered poor, roughly speaking, if its total monthly spending falls below this line. If you prefer thinking in terms of income, note that a six-person household with a consumption of $675 typically has an income of about $810 per month, or nearly $10,000 a year. Hopefully, this serves as a more relatable anchor.
Now on to the three reasons.
1. Ending extreme poverty remains a deeply ambitious objective. One frequent criticism of the $3 line is that, by virtue of being so low, it lacks ambition. This is supported by the drastic decline in global extreme poverty over recent decades. Surely, now we are in the last mile and can safely raise our ambitions for the future. Yet today, an estimated 826 million people still live in extreme poverty—a population larger than the European Union and the United States combined. There are still dozens of countries with extreme poverty rates upwards of 40%. If these countries develop at the typical pace of progress observed historically, it would take them at least three generations to get to 3%. And unfortunately, the poorest countries are currently progressing at a much slower rate than seen historically. If this continues, the number of extreme poor could rise over the coming decade. Regrettably, securing even this baseline standard of living for all of humanity remains a monumental challenge and getting close to zero will require unprecedented progress.
2. Extreme poverty focuses our attention on those in greatest need. Another critique of the extreme poverty line is that it lacks global relevance, as it ignores the deprivations typically experienced in middle-income countries. Yet, it is not obvious why global relevance should be the benchmark. Just as a national poverty line should not be relevant for all population groups, a global poverty line need not be relevant for all countries. If the core purpose of poverty monitoring is to identify those who require political attention and aid, it is worthwhile asking how the attention would be redirected by raising the poverty line. Raising the poverty line to $30 per day would at the margin shift attention to countries such as Slovakia and Hungary who have the largest population shares with incomes just below that line. At $45, it shifts attention to countries such as Czechia and Poland.
read more: https://blogs.worldbank.org/en/opendata/why-an-extreme-poverty-line-is-still-needed
