Most people in the world live in poverty. 85% of the world live on less than $30 per day, two-thirds live on less than $10 per day, and every tenth person lives on less than $1.90 per day. In each of these statistics price differences between countries are taken into account to adjust for the purchasing power in each country.
But what about the living conditions of the worst off: those who live in ‘extreme poverty’ as defined by the United Nations? The World Bank, which is part of the UN, is the main source for global information on extreme poverty today and it sets the ‘International Poverty Line’.
The poverty line was revised in 2015—since then, a person is considered to be in extreme poverty if they live on less than 1.90 international dollars (int.-$) 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.
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.
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.
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 it is the fact that still, almost every tenth person lives in extreme poverty.