Global Poverty Numbers Revised Upwards by the World Bank

On Tuesday, as the US Census Bureau was reporting on the latest poverty figures for the United States, the World Bank released it's own new data on global poverty. The Bank's report estimates that the number of poor people around the world is far higher than originally estimated. The number of poor people in 2005 is now estimated at 1.4 billion up from earlier estimates of 948 million, an increase of 500 million. This new data reflects improved ways of measuring the cost of living in developing countries and a larger set of household surveys in more countries. It suggests that the earlier measure of extreme poverty, the number of people who live on less than $1 a day underestimated the cost of living in developing countries. The new poverty line is $1.25 a day.

The report, “The Developing World is Poorer Than We Thought, But No Less Successful in the Fight against Poverty,” recalculates poverty rates for the last 25 years and finds that the number of people living in poverty under this new poverty line has fallen from 1.9 billion in 1981 to 1.4 billion. The world has been making steady progress in reducing poverty since 1981 at about 1% a year. At this rate, the world is on target to achieve the first Millennium Development Goal. However, there are significant disparities between regions and across countries. While the number of people in extreme poverty in China is higher than originally estimated (207 million as opposed to 130 million), it has made dramatic progress since 1981, when the number of people below the poverty line was 835 million. The rest of the developing world (not including China) has seen the number of people below $1.25 stay at around 1.2 billion since 1981, largely because population growth has outstripped progress against poverty.

About 29% of the population of the developing world (excluding China) lives on less than $1.25 per day, down from 40% in 1981. At this rate, the developing world without China is unlikely to achieve the first MDG.

According to the Bank's press release: "In South Asia, the $1.25 poverty rate has fallen from 60 percent to 40 percent over 1981-2005, but again, not enough to bring down the total number of poor people in the region, which stood at about 600 million in 2005. In India, poverty at $1.25 a day in 2005 prices increased from 420 million people in 1981 to 455 million in 2005, while the poverty rate as a share of the total population went from 60% in 1981 to 42% in 2005."

The trends in Sub-Saharan Africa continue to be worrisome. It has seen no change in the poverty rate, which continues to hover around 50%, while the number of people in extreme poverty has risen from 200 million in 1981 to 380 million 25 years later. The World Bank report suggests that if this continues, a third of the world’s poor people will live in Sub-Saharan Africa by 2015. This report provides a much more accurate picture of global poverty. Better data help target interventions and assistance to those who really need it, so in that sense the report, while painting a very gloomy picture of the scale of poverty in developing countries, is very welcome. The new data reaffirms the fact that, by and large, the world has made consistent progress against poverty but it lends urgency to the need to increase the pace of progress in those parts of the world that are struggling.

A word of caution, because the data are lagged, they do not reflect the impact of the recent spike in food and fuel prices. The World Bank estimates that an additional 100 million people have fallen into poverty since late 2006 as a result of rising prices of food staples.