A glance at World’s Poverty and Inequality (3/3)

The two first posts of this series considered inequality and its evolution through time. Inequality, a relative concept, is not the only issue with the economic well-being of a population. Maybe even more problematic is the absolute level of revenue some people at the bottom of the distribution experience. Below some revenue, it becomes difficult if not impossible to live, or even survive. Two thresholds are considered (and widely used, by the World Bank in particular) to assess the intensity of poverty people can experience:

  • 1 € per day: extreme poverty threshold.
  • 2 € per day: poverty threshold.

As the UN decided that one of its objectives for the new millennium would be to eradicate extreme poverty on Earth, we understand that the definition of poverty has direct consequences on public policies.

As for inequality, it is important to stress that there exist other indicators of poverty. Using this head-count of the number of persons under a certain income threshold does not allow taking into account the many dimensions poverty can have. Moreover, if one admits the head-count measure of poverty as relevant, the approach used to compute it can also be controversial*.

Nowadays, 3 billion persons live under the poverty threshold (about half world’s population) and 1.4 billion under the extreme poverty threshold (about 20% of the population). Almost none of those persons below the poverty thresholds live in rich countries. This does not mean that nobody should be considered as poor in rich countries. The poverty threshold considered by every country for its own policy purpose is different from the absolute thresholds given above. But one can agree that poverty in a rich country like France is not the same experience as living below those absolute thresholds.

What about the evolution of the absolute poverty figures? Counting the number of persons below the two thresholds gives us an idea of its evolution. A difference should be made between the percentage of the population categorized as poor and the absolute numbers. Indeed, if the percentage has been mostly decreasing since the industrial revolution, the growth of the world’s population induced the absolute number of extremely poor people to increase until around 1980. But since then, relative and absolute figures of poverty are decreasing. If the number of extremely poor persons has strongly decreased, the number of poor evolves less rapidly. What is going to happen next? The evolution of extreme poverty depends mainly on the economic growth of the very poor countries left behind.

There is at least one conclusion to make from the facts about poverty and inequality given in this series of three posts: our World is today far from perfect. Any ideas to improve it?

* see for example “How not to count the poor” by G. Reddy and W. Pogge, 2005.

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