The standard poverty line measure of US$1-a-day is unrealistically low. It disguises the real level of global poverty and understates the challenge of eliminating poverty. A poverty line of between US$2 and US$3-a-day would provide a more adequate measure of well-being and a truer estimate of the cost of eliminating poverty.

Research reported in the journal Third World Quarterly, uses predominantly the same survey data that the World Bank uses to estimate global poverty levels,  and presents an alternative to the US$1-a-day line. The standard poverty line is simply an average of a limited number of national poverty lines; it is not based on well-being outcomes or on any assessment of basic needs. The research draws on existing work on well-being measures and life-expectancy to identify an Ethical Poverty Line (EPL).

The EPL is an income threshold below which life expectancy falls rapidly as income falls; and above which life expectancy rises only very slightly with increased income. It is enough income for the average global citizen to live a full lifespan. The research identifies a global ethical poverty line (global EPL) of US$2.7-a-day. The research also identifies a lower EPL (minimum EPL) of US$1.9-a-day by excluding countries in sub-Saharan Africa (to reduce the impact of problems such as AIDS and civil war on the calculation).

Key findings include:

• The minimum EPL more than doubles the number of people considered to be living in poverty to 2.5 billion (40 percent of the world’s population).
• The global EPL indicates that 3 billion people (50 percent of the world’s population) are living in poverty.
• Assuming economic growth remains at current levels, the cost of removing poverty at the minimum EPL level would equal a 30 percent tax on all earnings above average US levels. This would affect half the US population and one-third of people in the UK.
• The cost of removing poverty at the global EPL level would equal a 30 percent tax on earnings for four-fifths of the US population and almost three-quarters of the UK population.

Reducing global poverty as defined by the EPL through economic growth would require growth levels that are probably unachievable and unsustainable. Recent experience has also shown that growth alone is not enough to reduce poverty. During the 1990s, most of the benefits from global economic growth went to an emerging global middle class (mostly located in China) and the rich; poor people benefited little.

The alternative to more economic growth to reduce poverty is a more extensive redistribution of existing resources. The redistribution implications of the EPL are therefore much more politically challenging than those of the standard US$1-a-day poverty line.

The author concludes that:

• Eliminating poverty at the EPL level would necessitate a substantial loss of income by middle-class residents of developed countries to allow an adequate increase in income for the poorest people in the world.
• Deep structural inequalities between rich and poor countries (for example in the distribution of global economic growth) would need to be addressed.
• The EPL also encourages citizens of rich countries to address issues of over-consumption.

Source(s):
‘The Ethical Poverty Line: A Moral Quantification of Absolute Poverty’, Third World Quarterly, 27.2, pages 377-393, by Peter Edward, 2006

id21 Research Highlight: 8 February 2007

Further Information:
Peter Edward
Judge Business School
University of Cambridge
Trumpington Street
Cambridge CB3 1AG
UK

Tel: +44 (0)1223 339700
Fax: +44 (0)1223 339701
Contact the contributor: p.edward@jbs.cam.ac.uk

University of Cambridge

Other related links:
'Measuring and managing social performance'

'Are the poor always with us?'

'Does it matter that we can’t agree on the definition of poverty?'

Eldis Poverty Resource Guide

Poverty assessment methods need re-thinking, UNDP Poverty Centre Working Paper (PDF)

A policymakers guide to applying relative poverty lines, FAO paper (PDF)

The Meaning and Measurement of Poverty, ODI Briefing Paper