Why an extreme poverty line is still needed

Since 1990, the World Bank has tracked extreme poverty around the world using an international poverty line, often referred to as the extreme poverty line. Ending poverty under this line, currently set at $3 per person per day in 2021 prices, has long been integral to the mission of the World Bank and it underpins the first target of the Sustainable Development Goals. Using the extreme poverty line, global progress has been historic. The share of the global population in extreme poverty has fallen from 43% in 1990 to 10% today. Countries that used to have double-digit extreme poverty rates, like China, India, Indonesia, and Brazil, now stand at 4% or lower, and more than one hundred economies worldwide have extreme poverty rates below 1%. This massive success has led many to ask: do we still need this extreme poverty line? Prominent scholars have debated abandoning or ending the use of the line. Two recent proposals suggest supplementing the line with a threshold 10 times or 15 times higher. In this blog, we will provide three reasons why the extreme poverty line remains a highly relevant goalpost. Our point is not to argue for a line exactly at $3 – any poverty line involves some amount of arbitrariness and uncertainty. Rather, we will argue that there is value to having a poverty line that, at face value, appears extremely low to many in the Global North. Before diving into the reasons, because few people think in daily, per-capita budgets in 2021 prices, let us translate the international poverty line into more relatable terms. For a six-person family—the typical household size for those in extreme poverty— in 2026 prices, the international poverty line comes to $675 per month ($8,100 per year). Most countries measure poverty by consumption, whereby the six-person household would be considered poor, roughly speaking, if its total monthly spending falls below this line. If you prefer thinking in terms of income, note that a six-person household with a consumption of $675 typically has an income of about $810 per month, or nearly $10,000 a year. Hopefully, this serves as a more relatable anchor. Now on to the three reasons. 1. Ending extreme poverty remains a deeply ambitious objective. One frequent criticism of the $3 line is that, by virtue of being so low, it lacks ambition. This is supported by the drastic decline in global extreme poverty over recent decades. Surely, now we are in the last mile and can safely raise our ambitions for the future. Yet today, an estimated 826 million people still live in extreme poverty—a population larger than the European Union and the United States combined. There are still dozens of countries with extreme poverty rates upwards of 40%. If these countries develop at the typical pace of progress observed historically, it would take them at least three generations to get to 3%. And unfortunately, the poorest countries are currently progressing at a much slower rate than seen historically. If this continues, the number of extreme poor could rise over the coming decade. Regrettably, securing even this baseline standard of living for all of humanity remains a monumental challenge and getting close to zero will require unprecedented progress. 2. Extreme poverty focuses our attention on those in greatest need. Another critique of the extreme poverty line is that it lacks global relevance, as it ignores the deprivations typically experienced in middle-income countries. Yet, it is not obvious why global relevance should be the benchmark. Just as a national poverty line should not be relevant for all population groups, a global poverty line need not be relevant for all countries. If the core purpose of poverty monitoring is to identify those who require political attention and aid, it is worthwhile asking how the attention would be redirected by raising the poverty line. Raising the poverty line to $30 per day would at the margin shift attention to countries such as Slovakia and Hungary who have the largest population shares with incomes just below that line. At $45, it shifts attention to countries such as Czechia and Poland. While all forms of deprivation are worthy of attention, we live in a reality where low-income countries receive 1/100th of the attention of high-income countries and 1/10th that of upper-middle income countries in media coverage. At the same time, while most in middle-income countries are on a ladder to higher living standards, the very poorest are making no progress and falling further behind everyone else: The bottom 10% of the global population have seen virtually no progress over the last decade, growing their incomes 0.1% annually, while those in the middle of the global distribution have grown by 2% annually (chart). With global Official Development Assistance (ODA) plummeting by roughly 30% over the last two years, even if all ODA was channeled to highly effective cash transfers targeted to those in extreme poverty, we would only have a third of the budget necessary to end extreme poverty (and nothing left for addressing deprivations in other domains like education and health). When resources are this scarce, we must prioritize those in greatest need. An extreme poverty line achieves that. 3. The extreme poverty line respects how the world's poorest nations define poverty. Solely based on an argument of attention to those worst off, one might then ask, why not lower the line further? Yet it is important to note that the line does not come out of thin air. Since its inception, the World Bank’s extreme poverty line has been determined by the national poverty lines of the poorest countries. These local thresholds are not arbitrary; they are carefully calibrated and are often centered around the cost of meeting basic needs for food and shelter. Significantly raising or lowering the global poverty line detaches it from the local realities of these nations, disregarding how they define poverty. For those of us fortunate enough to have never experienced severe forms of poverty, there is a profound unease in abandoning the definitions used by the very societies enduring these deprivations. These arguments do not imply we should abandon other measures of poverty, whether higher absolute lines, relative lines, or non-monetary indicators. Every one of these concepts serves a distinct, vital purpose. They also do not speak to how countries should set their own national poverty lines and should not serve as an excuse for middle-income countries to retain low national thresholds they surely have outgrown. Neither do the arguments mean that exiting extreme poverty signifies that individuals have ended poverty in all its forms. They certainly have not. Yet the arguments do mean that if raising the living standards of the worst off globally commands our attention, so does an extreme poverty line. We gratefully acknowledge financial support from the UK Government through the Data and Evidence for Tackling Extreme Poverty (DEEP) Research Program. This blog benefitted from discussions with Samuel Kofi Tetteh-Baah, Nishant Yonzan, and Benoit Decerf. The views expressed are our own and not those of the World Bank Group.