Target 1.a of the Millennium Development Goals set out to halve, between 1990 and 2015, the proportion of people whose income was less than US$1.25 a day (the threshold used to define extreme poverty). In 1990, about 1.9 billion people or more than one third of the world’s population lived on less than that amount per day. By 2015 this proportion had fallen to 12 per cent, meaning that more than 1 billion people had been lifted out of extreme poverty. While a very significant achievement, approximately 836 million remain in extreme poverty (United Nations, 2015a).
China and India, the most populous countries in the world, were the leading contributors to reduction of extreme poverty. Although extreme poverty has been declining globally and in many countries, poverty reduction has been unequal across regions and countries. Extreme poverty remains most concentrated in sub-Saharan Africa and Southern Asia, with 80 per cent of people in these regions still surviving on less than US$1.25 a day. In 2011, the United Nations (2015a) reported that almost 60 per cent of the world’s extremely poor people lived in just five countries: Bangladesh, China, the Democratic Republic of the Congo, India and Nigeria. The progress of Caribbean regions in poverty reduction between 1990 and 2011 has also been far slower than other regions of the world. Poverty within youth populations will remain a major challenge in coming decades for countries with rapid population growth1.1 (United Nations, 2015c).
Like slavery and apartheid, poverty is not natural. It is man-made and can be overcome and eradicated by the actions of human beings. Nelson Mandela (2005)
The international community’s recommitment to
end poverty in all its forms everywhere has been enshrined in the first Goal of the United Nation’s 2030 Agenda (United Nations, 2015b) and is essentially a continuation of Millennium Development Goal 1. But while the priority is to end extreme poverty, Goal 1 of the Sustainable Development Goals encompasses a broader view of poverty. The Sustainable Development Goals recognize that poverty is a multifaceted and multidimensional phenomenon with a complex mix of economic, social and environmental causes. The diversity of targets included in Sustainable Development Goal 1 illustrates this complexity, addressing several aspects of poverty or contributing factors to continued poverty; targets address the eradication of extreme poverty; the reduction of child and gender-specific poverty; the introduction of social transfers to protect the poor and vulnerable; equal access and rights to economic resources and services; reducing the impact of climate, social and economic shocks; ensuring countries implement policies to reduce poverty and also invest in poverty eradication actions.
The scale of poverty differs greatly around the world and so it can be confusing or even misleading to apply the same word to all these various states of hardship. While some level of poverty exists in every country and society, the extent or level of that poverty can differ greatly; for example, when we talk about poverty in Western Europe or in sub-Saharan Africa, we are typically talking about very different things. As a consequence, poverty can be defined in several different ways, such as relative povertyRelative poverty is defined in relation to the income distribution of a country; that is, when a person’s income is less than some fraction of average income (income threshold) deemed necessary to maintain a general standard of living (that is, a person has insufficient income to properly participate in normal day-to-day economic, social and cultural activities) in a particular country or region.
more, consistent povertyConsistent poverty is experienced when people are considered to be “at risk of poverty” and experience enforced material deprivation.
more and absolute povertyAbsolute poverty is experienced when people lack the basic necessities for survival: proper shelter, clean water, adequate food, medicines and clothing. From a measurement perspective, absolute poverty is usually defined as having an income below a fixed threshold.
more. If we think about poverty as the inability to participate in society, then concepts of relative poverty are appropriate. If, however, we are concerned with people not having enough to eat or not enjoying good health, then absolute poverty is a more appropriate measure. So for the purposes of measuring extreme poverty at a global level, a measure of absolute poverty is used as the barometer. The US$1.25-per-day threshold articulated in target 1.1 of the Sustainable Development Goals is such an absolute measure1.2.
In 1991 the World Bank introduced the
dollar-a-day international poverty line (Ravallion et al., 1991a; Ravallion et al., 1991b) to try to reflect the standards of absolute poverty in the world’s poorest countries. This international line was
anchored or calculated as an average of the national poverty lines of the 15 poorest developing countries. These absolute national poverty lines are typically set by determining the cost of a bundle or basket of essential goods and services necessary to meet basic needs. Two methodologies are typically used. The first, the
cost-of-basic-needsThe cost-of-basic-needs method is usually defined using a "basic-needs" approach; that is, the cost of a bundle of basic needs. is typically calculated on the basis of pricing 2,100 calories per person per day1.3 plus other costs associated with basic essentials such as heat, shelter and clothing. When price information is unavailable, a second approach, the
food-energy-intakeThe food-energy-intake method uses the consumption expenditure or income level to meet some predetermined food-energy requirement. is often used (Deaton, 1980; World Bank, 2005). To make these national averages comparable, they are converted to United States of America dollars using purchasing-power-parity exchange rates (PPPs) rather than nominal rates.
The World Bank has updated the international poverty line a number of times to reflect changes in PPP and inflation rates – the original US$1 line was updated to US$1.08 in 1993, US$1.25 in 2005 and again in 2015 (based on 2011 prices) to US$1.901.4.
Over the next 15 years we can expect the international poverty line to be updated again. It is for this reason that the Inter-agency and Expert Group on Sustainable Development Goal Indicators (IAEG-SDG) selected the
Proportion of population below the international poverty line disaggregated by sex and age group and employment status rather than the specific US$1.25 or US$1.90 measure as the appropriate indicator to measure progress towards target 1.11.5.
As noted above, significant progress has been made in reducing global extreme poverty. Figure 1.1 shows the progress towards this target over the past 35 years at a regional level. While there have been improvements everywhere, that progress has been uneven. Dramatic improvements are evident in East Asia and the Pacific, where the proportion of the population living in extreme poverty has fallen from more than 80 per cent in the 1980s to less than 8 per cent today.
Less dramatic, but nonetheless impressive, those experiencing extreme poverty in South Asia have fallen from 59 per cent in the early 1980s to around 19 per cent today. In sub-Saharan Africa reductions in extreme poverty have been more modest but still notable, falling from 57 per cent in the 1990s to 43 per cent today.
Despite the improvements made, in 2015 there were still approximately 830 million people (or 11 per cent of the population) still living below the international poverty line. If this poverty line were to be adjusted slightly, say increasing the threshold from $1.90 to $2.50 a day, then 25 per cent of the population would fall below the line – some 1.8 billion people. While the poverty line is a very useful instrument in that it is a relatively easy concept to understand and can be used to set a clear, definable target, it does not tell us much about income inequality. As populations lift out of extreme poverty, this is likely to become a more pressing issue.
Figure 1.2 shows how the income distribution has shifted to the right between 1980 and 2000, illustrating an improvement in global income. Although the income distribution for the year 2000 has moved to the right and has flattened somewhat relative to the 1970s, it is still quite steep, signifying persistent global inequality. Today, the top percentile (top 1 per cent of the population, accounting for approximately 4.5 million people) live on an average income of about US$290 a day. In contrast, the poorest 50 per cent of the population (approximately 3.4 billion people) live on an average income of US$7 a day.
The skewed income distribution is not limited to historic data, the uneven distribution is evident in more recent data also. Figure 1.3 depicts average income at the top of the distribution that has seen gains while little improvement has been observed at the very bottom of the global income distribution. The 1993 distribution had two peaks, one centred around $PPP 1.2 per day and another around $PPP 27 per day. By 2003, the second peak had flattened out, whereas the distribution centred around $PPP 1.5 per day peak had broadened.
As figure 1.4 illustrates, extreme poverty is still a global issue and still persists in parts of Asia, the Caribbean and in particular in sub-Saharan Africa. It is very difficult to get up-to-date information for all countries of the world, but some of the following facts illustrate the challenge. According to the latest available information, in Madagascar the proportion of the population living in extreme poverty is 82 per cent, in Burundi it is 78 per cent, in the Democratic Republic of the Congo 77 per cent and in Malawi 71 per cent.
In fact, according to the latest data available, at least 15 sub-Saharan countries have at least 50 per cent of their respective populations living in extreme poverty. But there are many countries for which no up-to-date information is available. Nor is it an exclusively African problem; in Haiti and many of the Micronesian islands the proportion of the population living in extreme poverty also exceeds 50 per cent.