How many people in the world today are extremely poor? This simple question is, perhaps unsurprisingly, extremely difficult to answer. However, since 1990, The World Bank has attempted to provide an answer by publishing comprehensive estimates of “extreme poverty” that are now widely used to monitor and appraise global policy and poverty reduction strategies. This is the well-known “dollar-a-day” international poverty line, based originally on a sample of developing country’s national poverty lines from the 1980s. (The so-called “dollar-a-day” now stands at $1.90 per day in light of updated global price data.)
Notwithstanding the continued growth in the world’s population, the absolute number of people living in extreme poverty has fallen. According to latest estimates, 12.7 per cent of the world’s population lived at or below a dollar-a-day in 2012 — down from 37 per cent in 1990, and 44 per cent in 1981. Despite these dramatic falls, 896 million people still live on less than a dollar-a-day. In April 2013, the World Bank pledged to end “extreme poverty” within a generation (i.e. to create a “world free of poverty” by the year 2030). It had set a similar target back in 1973 when it had (unsuccessfully) pledged to eradicate “absolute poverty” by the end of the century (i.e. the year 2000).
While The World Bank’s work in monitoring global poverty has been groundbreaking, critics argue that its estimates of global poverty remain flawed: the Bank’s poverty line appears arbitrary, and its calculations insufficiently anchored to any specification of human requirements. The bias in the Bank’s calculations may be substantial and, therefore, the extent of global poverty understated. In turn, poverty literature of the past decade has emphasised the multidimensionality of the concept and measurement of poverty. In addition to money-metric poverty lines and “basic needs” measures, focus has shifted towards non-monetary measures of deprivation poverty. Increasingly, policymakers and NGOs have also looked to address the growing problem of inequality in developing countries as part of the sustainable development agenda.
In a study commissioned by UNICEF and the Asian Development Bank,1 we set out to investigate the incidence of child poverty in the Pacific Island of Vanuatu, and considered a range of monetary and deprivation poverty measures. Methodologically, our results show that measurement issues are extremely important, and different approaches to estimation can have a substantial impact on the incidence of poverty. The table below summarizes our results, which suggest that if defined by the international “dollar-a-day” measure, 5 per cent of all children in Vanuatu live in extreme poverty. When defined by the national food and basic needs poverty line, a much greater proportion, 17 per cent, live in poverty (however, if living costs are priced at the regional level then the figure is lower at 11 per cent). We also found that 16 per cent of children live in absolute poverty (a measure usually defined by two or more severe deprivations regarding shelter, sanitation, water, information, nutrition, health, and education). Turning to income inequality, 23 per cent of children live in households with income below 50 per cent of the median, and 30 per cent of children live in households with income below 60 per cent of the median.
On the basis of these calculations, we might conclude that the current international “dollar-a-day” poverty line seriously underestimates global poverty levels. Thus, The World Bank’s “tighter” definition of poverty tends to lead to an improved poverty trend.
There is a growing body of empirical research using basic needs and caloric standards that also exposes the World Bank’s poverty underestimation through its use of the “dollar-a-day” measure.3 Such shortcomings need to be exposed. The Bank’s poverty standard is increasingly seen as arbitrary due to its inability to capture several important measures: the consumption and/or amount of expenditure needed to avoid extreme poverty; caloric requirements; and demographic characteristics. We may conclude then, that if The World Bank had used a poverty line grounded in basic needs — rather than its present and inadequate measure — the total number of poor people in world would significantly increase. This is because the national estimates of basic needs (food, clothes, shelter) poverty lines and the severe deprivation measures reported here indicate such an increase.
Finally, we might add that the global poverty estimates produced by The World Bank, and indeed our own study, are likely to underestimate the scale and nature of the global poverty problem because they are derived from household surveys that fail to capture non-household populations who are homeless or live in institutions (as well as mobile and/or nomadic populations). In developing countries, population estimates and assessments of poverty and progress are based increasingly on household surveys that are often inappropriate or inadequate for obtaining information about the poorest and most disadvantaged. In practice, it is difficult for surveys to reach those in fragile, temporary, disjointed or multiple-occupancy households. Survey researchers may also struggle to reach people living in urban slums or in areas where there may be security risks.3
1Deeming, C. and Gubhaju, B. (2015), The mis-measurement of extreme global poverty: A case study in the Pacific Islands, Journal of Sociology, 51: 689–706. http://jos.sagepub.com/content/51/3/689.full.pdf+html
2Klasen, S., Krivobokova, T., Greb, F. et al. (2016), International income poverty measurement: which way now?, The Journal of Economic Inequality, 14: 199–225.
3Carr-Hill, R. (2013), Missing millions and measuring development progress, World Development, 46: 30-44.