World Bank revises the Global Poverty Line

It’s unclear why the World Bank updated the International Poverty Line at this time. What is the new poverty line, and how many people are living in extreme poverty around the world based on this new metric? 

The New Global Poverty Line 

It has been $1.90 since 2015, when the last update was made. $2.15 is the new global line as of fall 2022.  

Using 2017 prices, the new global poverty line is $2.15. This means that a person is considered to be in extreme poverty if their daily income is less than $2.15. In 2017, just under 700 million people around the world found themselves in this position. 

The Implications For Previous Estimates 

Our estimates for previous years have been back cast in order to examine the trends in poverty reduction over the last three decades. Progress in eradicating poverty has been impressive since 1990, but it has slowed in recent years due to a variety of factors.  

Only Sub-Saharan Africa sees a 3.2 percentage point decrease in extreme poverty as a result of lower price levels, despite the overall increase in extreme poverty. There is still a large amount of poverty in Sub-Saharan Africa, however. 

A lot more must be done to ensure that the progress made over the years continues to be reversed by COVID-19 and other policies. 

Yet, despite this increase, global poverty has remained stable at around $1.90 per day 

An increase of $1.90 from 2011 prices to 2017 prices has made the international poverty line more expensive. The real value of the international poverty line, on the other hand, has remained essentially constant. As a result, a typical low-income country’s basket of goods and services would cost $2.15 in 2017 on average. 

Poverty’s Other Manifestations 

Many non-monetary indicators, such as education, health, sanitation, water, and electricity, are critical to understanding the many facets of poverty that people face. As part of the effort to improve the lives of the poorest, these measures should be taken into account. 

Non-monetary dimensions of poverty are taken into account in its multidimensional poverty measurement. 

How realistic is it that the WBank’s target of reducing extreme poverty to 3% (or less) by 2030 can be achieved? 

With the pandemic, it will be even harder for people to rise out of extreme poverty. People will need to protect their hard-earned gains and assets in order to avoid falling back into poverty after a drought or a disease or an economic shock if extreme poverty is to be eradicated by 2030. 

World Bank’s use of other poverty lines in tracking global poverty 

Various poverty thresholds have been established by the World Bank in order to assess the level of a person’s financial plight. To begin, the IPL is used to determine the level of extreme poverty. To measure poverty in low-income countries, use this line. To measure poverty in richer countries, two higher lines are more relevant. For lower-middle-income countries, these lines cost $3.65, and for upper-middle-income countries, they cost $6.85. 

The World Bank also uses a societal poverty line (SPL), which is more relative. With 2011 PPPs, the SPL is $1.00 plus half the country’s median level of consumption, or the international poverty line if $1.00 plus half the country’s median level of consumption is less. This line grows with a country (and the median increases). If $1.15 plus half the median level of consumption is below the international poverty line, then the societal poverty line is $1.15 plus half the median level of consumption. 

The main source of change in the international poverty line from $1.90 to $2.15 

Changing purchasing power parities in low-income countries have been a major factor in the shift in the global poverty line between 2011 and 2017. (i.e., the changes in prices in low-income countries between 2011 and 2017 relative to the rest of the world). A country’s real increase in the poverty line or the number of countries for which national poverty lines are available has no effect on the international poverty line. 

Edited By: Khushi Thakur

Published By: Akshaj Joshi