Measuring Global Poverty

Updated February 11, 2017 | Infoplease Staff

Traditionally, poverty has been measured by the lack of a minimum income (or consumption level) necessary to meet basic needs. Measuring poverty on a global scale requires establishing a uniform poverty level across extremely divergent economies, which can result in only rough comparisons. The World Bank has defined the international poverty line as U.S. $1 and $2 per day in 1993 Purchasing Power Parity (PPP)1, which adjusts for differences in the prices of goods and services between countries. The $1 per day level is generally used for the least developed countries, primarily African; the $2-per-day level is used for middle income economies such as those of East Asia and Latin America. By this measure, in 2005 there were 982 million people out of the developing world's 4.8 billion people living on $1 per day, while another 2.5 billion (40% of the world's population) were living on less than $2 per day2. In 2005, The poorest 40% of the world population accounted for 5% of global income. The richest 20% accounted for 75% of world income, and the richest 10% accounted for 54%.

The $1- and $2-per-day measures offer a convenient, albeit crude, way to quantify global poverty. In the last several decades, poverty research has adopted a broader, multidimensional approach, taking into account a variety of social indicators in addition to income. The UN's Human Poverty Index, for example, factors in illiteracy, malnutrition among children, early death, poor health care, and poor access to safe water. Vulnerability to famine or flooding, lack of sanitation, exposure to disease, a diet poor in nutrients, and the absence of education are as much the signs of poverty as material deprivation. Providing the poor with basic social services and infrastructure would in many cases alleviate poverty to a greater extent than simply a rise in income level.

1. Purchasing power parity (PPP), as defined by the World Bank, is “a method of measuring the relative purchasing power of different countries’ currencies over the same types of goods and services. Because goods and services may cost more in one country than in another, PPP allows us to make more accurate comparisons of standards of living across countries.”