Monitoring poverty at the US$3.20 and US$5.50 lines: differences and similarities with extreme poverty trends

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Poverty does not end when a household crosses the US$1.90 per person per day International Poverty Line (IPL).  The IPL was constructed based on the prevailing national poverty lines for some of the poorest economies in the world. When it was set up, 60% of the global population lived in low-income countries, making the IPL a meaningful measure for a large share of the world’s population.

As of 2017, only about 9% of the world’s population lived in low-income countries, while 41% of people lived in lower-middle-income countries (LMICs) and 35% in upper-middle-income countries (UMICs). In 2018 the World Bank presented two additional poverty lines to complement the $1.90 line that reflects national poverty lines typically found in LMICs (US$3.20 a day) and UMICs (US$5.50 a day).

Monitoring poverty at the US$3.20 and US$5.50 lines: differences and similarities with extreme poverty trends

The US$3.20 and US$5.50 lines will be increasingly relevant to monitor poverty in the coming decade. Moreover, these lines are crucial to assess the share of the population that lives above the US$1.90 line but remains vulnerable to extreme poverty.

This is especially relevant in the current COVID-19 pandemic, which is estimated to push around 130 million people below the US$1.90 line using the most recent growth forecasts (and around 250 million below US$3.20 and around 215 million below US$5.50) in addition to the long-run threats linked to climate change.

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The Poverty and Shared Prosperity 2020 Report published last month analyses updated estimates of poverty at the US$3.20 and US$5.50 lines. Figure 1 shows that about a quarter of the global population lives below the US$3.20 poverty line, and almost half-lives below the US$5.50 line, compared with less than a tenth below US$1.90.

These figures translate to 1.8 billion people and 3.3 billion people at the US$3.20 and US$5.50 lines as of 2017, 140 and 120 million less than in 2015 respectively. Although the poverty rates have declined (from 55.5% in 1990 to 24.1% in 2017 at the US$3.20 line and from 67.3% to 43.6% at the US$5.50 line), the headcounts remain large.

The number of people living below US$3.20 today is as high as the number of people below the IPL in 1990. The number of people living below US$5.50 per person per day has barely declined over the past 30 years. These trends illustrate the scale of the challenge that remains at these higher lines.

Similar to extreme poverty, i.e. the share of the population living below the US$1.90 line, there is some evidence of a slowdown in poverty reduction at the higher lines, but it is less dramatic. The poverty rate at both higher lines declined by about 2.5 percentage points between 2015 and 2017, similar to the decrease between 2013 and 2015.

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However, the poverty rate had fallen by 3.5 percentage points or more, between 2011 and 2013, pointing to slower poverty reduction in the most recent years. While extreme poverty is increasingly concentrated in Sub-Saharan Africa, this geographical pattern is less pronounced at the higher lines.

In contrast to extreme poverty, the largest number of poor at both the US$3.20 and US$5.50 poverty lines live in South Asia (note that the absence of recent data on India gives rise to considerable uncertainty over our understanding of poverty in the country, the region and the world, also see this blog). While Sub-Saharan Africa accounts for two-thirds of the extreme poor, it accounts for a third of the poor at the US$3.20 line.

Read Also:  As incomes rise, farm employment drops

In contrast, South Asia accounts for a quarter of the global extreme poor, but for almost half of the poor at the US$3.20 line. Moving up to the US$5.50 line, East Asia and the Pacific accounts for almost a fifth of the global poor.

The high poverty rates in South Asia and Sub-Saharan Africa at these poverty lines should not lead one to believe that these are very high thresholds for economies in these regions. The US$3.20 poverty line is typical of lower-middle-income countries.

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Almost all of the population in South Asia lives in lower-middle-income economies, and half of the population in Sub-Saharan Africa lives in countries that are lower-middle income or even upper-middle-income.

East Asia’s success in reducing poverty goes well beyond extreme poverty and all the way up to the US$5.50 line, although at a slower pace at the higher lines. In 2018, 7.2% of the population lives below the US$3.20 line (149 million poor) and a quarter of the population lives below the US$5.50 line (520 million poor).

In contrast, progress in South Asia has been slower at the higher lines than for extreme poverty; more than 50% of the region’s population lived below the US$3.20 poverty line in 2014 (the last year with sufficient population coverage for the region).

For many other regions, the results at the higher lines are similar to those for extreme poverty. The poverty rate is increasing in the Middle East and North Africa under all lines and largely stagnating in Latin America and the Caribbean.

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