Poverty Measurement in the World Samuel Freije-Rodriguez (lead economist) Poverty & Equity Global Practice, The World Bank October 2017

Official Poverty lines in the World World Bank twin goals Outline Official Poverty lines in the World World Bank twin goals Frontiers in the measurement of poverty

1. Official Poverty lines in the World

Country practices around the developing world Not a full sample, but will provide a picture of official methodologies in other countries Two case studies from high-income countries United States European Union

In developing countries, ever more frequently available and shared In developing countries, ever more frequently available and shared. In the decade of 1990, only 31 developing countries produced official poverty estimates…

…by the decade of 2010-2015, more than 100 countries regularly produce official poverty estimates.

Most developing countries use a consumption (rather than income) welfare aggregate…

…most developing countries use an absolute (rather than a relative) poverty line…

…and most developing countries use a similar method for defining and updating the poverty line…

Country practices in High-income countries High-Income countries have a long history in producing official poverty estimates, Use income as welfare aggregate, But type of poverty line method varies

The USA uses an absolute poverty line … Same methodology defined in the mid 1960s and still used today, “Supplemental poverty measures” forthcoming

European countries use a relative poverty line (60% of national equivalized median income) Minimal acceptable standards (i.e. poverty lines) usually differ between societies according to their general level of prosperity Someone regarded as poor in a rich developed country might be regarded as rich in a poor developing country

2. World bank twin goals

in a sustainable manner. Ending extreme poverty - reducing the share of the global population living in extreme poverty to 3 percent by the year 2030 Promoting shared prosperity - increasing the income of the bottom 40 percent of the population in each country in a sustainable manner. Poverty rates based on the $1.90/day 2011PPP International Poverty Line Annualized growth rates of income or consumption of the bottom 40

Why do we need an International poverty line? Cross-country comparability so we can talk about the global poor Tracking of global goal of ending poverty World Bank Twin Goals SDG Goal 1 monitoring (originally based on $1.25 2005PPP poverty line, which has since been updated to an equivalent $1.90 2011PPP line)

Where does the current global poverty line of US$1.90 come from? Update the IPL to per capita $1.25-a-day using 2005 PPPs for consumption, which also comes from previous estimates of famous dollar-a-day from 1990 World Development Report Compilation of national poverty lines from 74 countries Reference group of the poorest 15 countries: Malawi, Mali, Ethiopia, Sierra Leone, Niger, Uganda, Gambia, Rwanda, Guinea-Bissau, Tanzania, Tajikistan, Mozambique, Chad, Nepal and Ghana Figure 1: National poverty lines for 74 developing countries plotted against mean consumption using consumption PPPs for 2005

Most recent global estimates come from Poverty and Shared Prosperity 2016 report: Global extreme poverty continues to decline, but remains unacceptably high. Between 2012 and 2013, around 100 million people moved out of extreme poverty. And since 1990, nearly 1.1 billion people have escaped extreme poverty. But still, nearly 800 million people or 1 in 10 people in the world lived under $1.90 a day in 2013.

3. Frontiers in the measurement of poverty

Illustration of Multidimensional poverty measure in Mexico (2014) Several countries in the world have already adopted innovative ways to measure poverty, particularly in multidimensional terms Non-poor and Non-vulnerable Mexico: complex aggregate of six non-monetary and one monetary measure Colombia: 15 indicators into a single aggregate Nepal: based on philosophical/religious concept of happiness Philippines: uses national version of Oxford’s OPHI MPI Monetary poverty line Food poverty line Income vulnerable Multi-dimensional poor Number of deprivations in social services

International Poverty Line ($1.90/day 2011 PPP per capita) Lower-Middle Income Class Line ($3.2/day 2011 PPP per capita) Equivalent to the median of national poverty lines of lower-middle income class countries Upper-Middle Income Class Line ($5.5/day 2011 PPP per capita) Equivalent to the median of national poverty lines of upper-middle income class countries Societal Poverty Line Multi-Dimensional Index, non-monetary poverty The World Bank will also implement innovations in global poverty measurement in coming years: Based on the “Atkinson report”, published in October 2016, the World Bank will introduce a series of new monetary poverty measures as well as some forms of multi-dimensional poverty

World Bank (2018), under production Poverty & Shared Prosperity Flagship Taking on Inequality World Bank (2016) “Atkinson Report” World Bank (2017) http://www.worldbank.org/en/publication/poverty-and-shared-prosperity Poverty & Shared Prosperity Flagship (2nd) World Bank (2018), under production

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