- About 826 million people remain below the World Bank’s $3-a-day extreme poverty line.
- The global extreme poverty rate has fallen from 43 per cent in 1990 to about 10 per cent today.
- More than 100 economies have reduced extreme poverty to below 1 per cent.
- World Bank economists say the benchmark remains important for targeting the world’s poorest people.
- Official development assistance has fallen by about 30 per cent over the past two years.
The World Bank has defended its international extreme poverty line, saying the $3-a-day threshold remains necessary despite major progress in reducing poverty around the world.
About 826 million people are still living below the threshold, according to World Bank economists Daniel Gerszon Mahler, Christoph Lakner and Umar Serajuddin. In a World Bank Data Blog, the economists said the measure remains useful for identifying people facing the most severe economic hardship and helping governments and development agencies direct limited resources towards them.
The international poverty line is currently set at $3 per person per day using 2021 prices. It also supports the first Sustainable Development Goal, which calls for the eradication of extreme poverty worldwide.
The proportion of people living in extreme poverty has dropped significantly over the past three decades. The rate stood at 43 per cent of the global population in 1990 but has fallen to about 10 per cent today.
Several major economies have recorded particularly strong gains. China, India, Indonesia and Brazil, which once had extreme poverty rates in double digits, now have rates of 4 per cent or lower.
More than 100 economies have also brought their extreme poverty rates below 1 per cent. The progress has nevertheless triggered debate over whether the $3 threshold remains suitable for measuring poverty in a world where living standards have improved in many countries.
Some scholars have suggested introducing higher poverty thresholds, including measures set at 10 or 15 times the current international line. The World Bank economists acknowledged the debate but argued that the lowest threshold still serves an important purpose.
The economists said eliminating extreme poverty remains a difficult global target because of the sheer number of people affected. They noted that the population living below the threshold is larger than the combined populations of the European Union and the United States.
Some countries continue to record extreme poverty rates above 40 per cent. At their historical pace of development, the economists said, some of these countries could need at least three generations to reduce extreme poverty to 3 per cent.
The situation could become more difficult if the poorest economies continue to grow more slowly than they have in the past. The World Bank economists warned that the number of people living in extreme poverty could rise over the coming decade if current trends persist.
Limited Resources Make Poverty Targeting Important
The economists also argued that maintaining a measure focused on the poorest people helps governments and development organisations decide where scarce resources are most urgently needed.
Their analysis showed that the poorest 10 per cent of the world’s population recorded average annual income growth of just 0.1 per cent over the past decade. That compares with about 2 per cent among people around the middle of the global income distribution.
At the same time, official development assistance has fallen by about 30 per cent over the past two years. The economists estimated that even if all development assistance were redirected into highly effective cash transfers for people living in extreme poverty, it would still meet only about one-third of the amount needed to eliminate extreme poverty.
Higher Poverty Measures Still Have a Role
The World Bank economists said the $3 threshold should not be treated as the only way of understanding poverty. Higher poverty lines and measures that consider non-monetary forms of deprivation remain important because moving above the extreme poverty threshold does not automatically mean that a person has achieved an adequate standard of living.
They noted that national poverty lines in the world’s poorest countries often reflect the cost of meeting basic needs such as food and shelter. This provides a basis for retaining an international measure that focuses specifically on the most severe economic deprivation.
The economists ultimately maintained that the $3-a-day threshold remains important for tracking progress among the world’s poorest people. They also stressed that the opinions expressed in the blog were their own and did not necessarily represent the official position of the World Bank Group.
