A common method used to measure poverty is based on incomes or consumption levels. A person is considered poor if his or her consumption or income level falls below some minimum level necessary to meet basic needs. This minimum level is usually called the "poverty line". What is necessary to satisfy basic needs varies across time and societies. Therefore, poverty lines vary in time and place, and each country uses lines which are appropriate to its level of development, societal norms and values.
Information on consumption and income is obtained through sample surveys, with which households are asked to answer detailed questions on their spending habits and sources of income. Such surveys are conducted more or less regularly in most countries. These sample survey data collection methods are increasingly being complemented by participatory methods, where people are asked what their basic needs are and what poverty means for them. Interestingly, new research shows a high degree of concordance between poverty lines based on objective and subjective assessments of needs.
For details on methodology, see Measuring Poverty. For data see Statistics and Indicators.
Measuring poverty at the global level
When estimating poverty worldwide, the same reference poverty line has to be used, and expressed in a common unit across countries. Therefore, for the purpose of global aggregation and comparison, the World Bank uses reference lines set at $1.25 and $2 per day (2005 Purchasing Power Parity terms). Using improved price data from the latest (2005) round of the International Comparison Program, new poverty estimates released in August 2008 show that about 1.4 billion people in the developing world (one in four) were living on less than $1.25 a day in 2005, down from 1.9 billion (one in two) in 1981. The new international poverty line of $1.25 a day at 2005 prices is the mean of the national poverty lines for the 10-20 poorest countries of the world. While the revised estimate is significantly higher than earlier estimates of less than a billion people living under $1 a day in 1993 prices, the developing world as a whole remains on track to meet the first Millennium Development Goal to halve extreme poverty from its 1990 levels by 2015. However, poverty is more pervasive than earlier estimated, and efforts to fight it will have to be redoubled, especially in Sub-Saharan Africa. Also, lags in survey data availability mean that the new estimates do not yet reflect the potentially large impact on poor people of rising food and fuel prices since 2005.
The research behind the new estimates is explained in a research paper "The Developing World Is Poorer Than We Thought, But No Less Successful in the Fight against Poverty" by Ravallion and Chen (2008) and in a shorter, bulleted brief, and web article. The data will be available on PovcalNet on September 30, 2008.
New directions in poverty measurement
While much progress has been made in measuring and analyzing income poverty, efforts are needed to measure and study the many other dimensions of poverty. Work on non-income dimensions of poverty -- defining indicators where needed, gathering data, assessing trends -- is presented in the World Development Report (WDR) 2000/01: Attacking Poverty. This work includes assembling comparable and high-quality social indicators for education, health, access to services and infrastructure. It also includes developing new indicators to track other dimensions -- for example risk, vulnerability, social exclusion, access to social capital -- as well as ways to compare a multi-dimensional conception of poverty, when it may not make sense to aggregate the various dimensions into one index.
In addition to expanding the range of indicators of poverty, work is needed to integrate data coming from sample surveys with information obtained through more participatory techniques, which usually offer rich insights into why programs work or do not. Participatory approaches illustrate the nature of risk and vulnerability, how cultural factors and ethnicity interact and affect poverty, how social exclusion sets limits to people’s participation in development, and how barriers to such participation can be removed. Work on integrating analyses of poverty based on sample surveys and on participatory techniques is presented in the WDR. An example of participatory work is given by the Voices of the Poor studies. See an extract of these studies at "What the Poor Say" (150Kb PDF).
Back to Poverty Analysis