updated January 2015
As each national poverty line in poorer countries reflects its own definition of essential food and goods, an alternative method is needed to aggregate global poverty on a consistent basis.
The World Bank calculates an international poverty line by reference to the national poverty lines in 10-20 of the world’s poorest countries. These figures are converted into US dollars, not by standard currency exchange rates, but by purchasing power parity (PPP) rates. This exercise was last completed using 2005 data, the average figure becoming the international poverty line of $1.25 per day.
The spending power of $1.25 in the United States at 2005 prices therefore provides an indication of the experience of poverty for just over one billion people. This 2011 measure of global poverty was calculated by comparing the $1.25 benchmark with the income and consumption data from hundreds of household surveys conducted in developing countries in the period immediately preceding 2011. This is the most recent year for which data is considered adequate.
This process inevitably leads to confusion in countries whose choice of national poverty line differs significantly from the international benchmark. A prolonged and controversial review of the national poverty line in India was provoked in part because it had fallen in value so far behind the $1.25 figure.
A second tier international poverty line of $2 per day is derived from the average of national poverty lines in all lower and middle income countries. The World Bank reports that 2.2 billion people lived below this benchmark in 2011, a figure which has changed little since 1981, when it was 2.6 billion.
The World Bank is currently updating PPP rates to reflect data collected for 2011. The international poverty line of $1.25 is therefore likely to be raised soon.
A criticism of income-based global poverty assessment is its exclusion of important human development criteria such as education, health, water and housing. A new Multidimensional Poverty Index, launched in 2010 and subsequently updated by the UN Development Programme, is the most recent attempt to supplement our understanding of poverty through statistics.
Understanding how people move in and out of poverty is important
a World Bank production.
more Global Poverty briefings
Global Poverty Statistics
National Poverty Line
International Poverty Line
Causes of Global Poverty
Should We Care About Poverty?
Goals for Poverty Reduction
Global Poverty Solutions