World Economy

World Bank Revises Poverty Line

World Bank Revises Poverty LineWorld Bank Revises Poverty Line

The World Bank is to make the most dramatic change to its global poverty line in 25 years, raising its measure by a half to about $1.90 per day in a move likely to swell the statistical ranks of the world’s poor by tens of millions.

The move from $1.25 would be the biggest revision since the World Bank introduced its $1 a day yardstick of global poverty in 1990, CNBC reported.

World leaders on Friday meet at the United Nations headquarters to commit to 17 new “sustainable development goals” meant to guide development policy for the next 15 years. The first and most prominent is the eradication by 2030 of “extreme poverty everywhere” as defined by the World Bank’s $1.25 a day line.

But the bank is expected to follow that by shifting its poverty line to about $1.90 ahead of its annual meetings in Lima, Peru, in early October—a move likely to result in significant shifts in the estimated size and distribution of the planet’s poor.

Although it is difficult to predict exactly how many more people will be defined as poor, when researchers at the bank earlier this year tested a notional poverty line of $1.92 it led to a surge of 148 million.

Most of the difference came in East Asia where the ranks of those falling below the poverty line almost doubled from 157 million at the old $1.25/day measure to 293 million. In Latin America the result was an increase of 8 million, or more than 25% in the number of poor to 37 million, while in South Asia the ranks of the poor grew by 7 million to 407 million. Under that line, sub-Saharan Africa remained steady at some 416 million.

  Measuring Poverty

The move follows more than a year of discussions within the bank following the release of new purchasing power parity estimates meant to allow a better comparison of the relative buying power of consumers around the world and the size of economies.

The shift is likely to renew a debate over the robustness of the World Bank’s poverty line. Earlier this year it assigned a new commission led by British economist Sir Anthony Atkinson to examine ways to measure poverty and how to update the existing poverty line.

Among its members is Angus Deaton, the Princeton economist and persistent critic of a poverty line that he argues has been misleading for years. “You’ve got a line that no one knows where to put it, PPPs that change, and underlying data that is bad,” he said. “It is sort of a statistical problem from hell.”