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Monitoring progress on poverty: the case for a high global poverty line

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Lant Pritchett

Lant Pritchett

Lant Pritchett is a senior fellow at the Center for Global Development and professor of the practice of international development (on leave) at Harvard's Kennedy School of Government, where he has taught from 2000 to 2004 and from 2007 to 2012. 

Date: 
16 May 2013
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Author Bio

Lant Pritchett is a senior fellow at the Center for Global Development and professor of the practice of international development (on leave) at Harvard's Kennedy School of Government, where he has taught from 2000 to 2004 and from 2007 to 2012. 

This is the second in a series of blogs that debate how a post-2015 framework ought to measure poverty - find out more.

There is an easy, simple and obvious solution to monitoring progress in reducing consumption expenditure poverty post-2015:

  •  a low global poverty line,
  • a high global poverty line and
  • a variety of national poverty lines in between.

Everyone agrees on tracking something like a ‘dollar a day’ (or now the much less rhetorically catchy ‘buck and a quarter’) poverty line that demarcates ‘extreme poverty’. Reducing the human deprivation represented by extreme poverty is clearly one development priority.

Everyone also agrees that countries will have their own national poverty lines and that countries will track progress in poverty reduction based on their own poverty lines. Since poverty is a social construct, there is no argument for not allowing each society to construct their own poverty line for use in policy and programme formulation and in tracking their own progress.

So the question boils down to whether there should in addition to those be a measure of global poverty based on a ‘high’ poverty line.  I think there should be.

My argument is that for global discussions on poverty, we cannot simply ignore the fact that many OECD countries claim they have poverty too. The USA poverty line for a family of four (two adults, two children) in 2005 was $19,806 or $13.56 per person per day (ppd). Most European countries use a relative standard of ‘60% of equivalised median income’ and Eurostat reports for 19 western European countries worked that out to be $18.33 ppd. For the lower income European countries this was $11 ppd in Spain, $10 in Greece, and only $7.76 in Portugal. Since the origin of the ‘dollar a day’ line was just to adopt as a global lower bound the poverty lines used by the poorest countries, it symmetrically makes sense to say that the global upper global poverty line is based on the poverty line in rich countries.

A good round number is $12.50 ppd—and to monitor progress that would remain fixed (in inflation adjusted terms) over time. That is in the range of the lower poverty lines for both absolute (USA) and relative (European) poverty lines in rich countries and is a nice even ten times as high as the $1.25. 

What are the arguments for a high poverty line?

First, basic fairness. There seems to be massive global inequity built into definitions of poverty that do not allow the world’s population to even aspire to the living standards of the now rich industrial world. How can it be that the USA uses one standard for its own residents but the global standard is ten times lower? The poverty line is about $450 a year, while a male high school drop-out in the USA earns $421 dollars a week. People might argue that high poverty lines ‘aren’t really’ what people mean by poverty. To which my answer is, yes, they most certainly do mean that when they say there is poverty in the USA.

Second, with a high poverty line, 5 billion people are not ignored. Roughly speaking, about 1 billion people are in extreme poverty, about 1 billion are above a high threshold and 5 billion are in between. Why would we want to build a development agenda that did not measure how the standard of living of those 5 billion people is progressing? Currently, people speak as if the ‘poverty’ agenda and a ‘share prosperity’ agenda are two different things. But this separation is completely an artifact of using exclusively a low global line to define poverty; using a high global poverty line makes it clear that ‘shared prosperity’ is the path to reduction of both extreme poverty and global poverty. 

Third, there is absolutely no defense of using exclusively low poverty lines. While below $1.25 provides a good answer to ‘who is for sure poor?’, being above $12.50 provides a good answer to ‘who is for sure not poor?’. No one, not even the staunchest defenders of low poverty lines, would argue that a poverty line of $1.27 would not also be a reasonable line.  Or $1.57. What about $2.50? And if $2.50, why not $3.23? Where does this stop? It stops at the poverty definitions of rich countries.

Fourth, if one looks at the empirical relationship between other indicators of wellbeing — like health status, educational opportunity, access to water and sanitation — there is no ‘kink’ in these relationships. There is steady progress as people get richer. Goals in all of these domains are also promoted by households and individuals having more command over resources — and often in nearly proportional terms. 

Fifth, the only distinction between most consumption expenditure poverty measures and standard economics is that above the threshold poverty line, more gains in income do not lead to further reductions in poverty. Therefore we should feel comfortable that we value additional gains to income at (almost) exactly zero at the poverty line. And yet certainly most people do not believe gains to their own wellbeing stop at ‘dollar a day’ or ‘two dollars a day’ levels. If the value of additional money were really zero, lots fewer people would show up for work every day. While certainly above some threshold, command over resources for consumption becomes less important for standard of living or emotional wellbeing or life satisfaction — but that level is almost certainly more like the $51 ppd than $5 per day

I can see good arguments against exclusively using a high poverty line. For instance, if donors wanted to concentrate resources on countries with high levels of global poverty, a high poverty line isn’t very helpful for that purpose. But that is why we need multiple indicators for multiple purposes. For some purposes ‘extreme poverty’ is very useful, whereas for others, like measuring progress in middle income countries where ‘extreme poverty’ is very low or focusing on the continued gaps between rich countries and the rest, it is not useful at all. 

A low poverty line (like dollar a day), a high poverty line (like $10 or $12.50 or $15), and national lines for developing countries arrayed in between those low and high levels, seems like a sensible and pragmatic approach to both emphasizing the concerns about the extremes of destitution while also building a broad-based foundation for raising global living standards.

For another view on post-2015 and measuring poverty, see this Development Progress blog from Martin Ravallion.