The research here is concerned with the living conditions of the worst off: those who live in ‘extreme poverty’ as defined by the United Nations. The World Bank, which is part of the UN, is the main source for global information on extreme poverty today and it sets the ‘International Poverty Line’. The poverty line was revised in 2015—since then, a person is considered to be in extreme poverty if they live on less than 1.90 international dollars (int.-$) per day. This poverty measurement is based on the monetary value of a person’s consumption. Income measures, on the other hand, are only used for countries in which reliable consumption measures are not available.
A key difficulty in measuring global poverty is that price levels are very different in different countries. For this reason, it is not sufficient to simply convert the consumption levels of people in different countries by the market exchange rate; it is additionally necessary to adjust for cross-country differences in purchasing power. This is done through Purchasing Power Parity adjustments (explained below).
It is important to emphasize that the International Poverty Line is extremely low. Indeed, ‘extreme poverty’ is an adequate term for those living under this low threshold. Focusing on extreme poverty is important precisely because it captures those most in need. However, it is also important to point out that living conditions well above the International Poverty Line can still be characterized by poverty and hardship. Accordingly, in this entry we will also discuss the global distribution of people below poverty lines that are higher than the International Poverty Line of 1.90 int.-$. But relying only on higher poverty lines would mean that we are not keeping track of the very poorest people in the world and this is the focus of this entry.
Poverty is a concept intrinsically linked to welfare – and there are many ways in which one can try to measure welfare. In this entry we will focus mainly (though not exclusively) on poverty as measured by ‘monetized’ consumption and income, following the approach used by the World Bank. But before we present the evidence, the introductory sub-section here provides a brief overview of the relevance of this approach.
Global poverty is one of the very worst problems that the world faces today. The poorest in the world are often hungry, have much less access to education, regularly have no light at night, and suffer from much poorer health. To make progress against poverty is therefore one of the most urgent global goals.
The available long-run evidence shows that in the past, only a small elite enjoyed living conditions that would not be described as ‘extreme poverty’ today. But with the onset of industrialization and rising productivity, the share of people living in extreme poverty started to decrease. Accordingly, the share of people in extreme poverty has decreased continuously over the course of the last two centuries. This is surely one of the most remarkable achievements of humankind.
Closely linked to this improvement in material living conditions is the improvement of global health and the expansion of global education that we have seen over these last two centuries. We also discuss the link between education, health, and poverty in this entry.
During the first half of the last century, the growth of the world population caused the absolute number of extremely poor people in the world to increase, even though the share of people in extreme poverty was going down. After around 1970, the decrease in poverty rates became so steep that the absolute number of people living in extreme poverty started falling as well. This trend of decreasing poverty—both in absolute numbers and as a share of the world population—has been a constant during the last three decades. But as we highlight in the first section of this entry it is unfortunately not what we can expect for the coming decade. It is the fact that still almost every tenth person lives in extreme poverty and the slowing progress against extreme poverty that motivate this entry.
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