Girl in in Zorro village, Burkina Faso. Photo credit: flickr (CIFOR)

The World Bank released some good news this month regarding extreme global poverty. In the report “Ending Extreme Poverty and Sharing Prosperity: Progress and Policies,” the Bank predicts that by the end of 2015, the number of people living in extreme poverty worldwide will drop from 902 million (the 2012 level) to 702 million, or 9.6 percent of the global population. This marks the first time that the percentage of global extreme poverty will fall to single-digit levels, providing hope that the Sustainable Development Goals of reducing extreme poverty to 3 percent and promoting income growth in the bottom 40 (B40) percent of the global population by 2030 could be realistic – with the right commitments.

The report looks at poverty in three ways: changes in income poverty based on the new international poverty line, defined at US$1.90 a day; an assessment of person-equivalent income poverty, a new indicator combining poverty incidence with poverty depth; and a review of poverty’s breadth, looking at non-income deprivations or so-called “multi-dimensional” poverty. The World Bank uses a multitude of data sources to calculate global extreme poverty rates, including price data that measure differences in the cost of purchasing goods across countries (purchase power parity, or PPP). This is used to ensure that the calculated global poverty lines truly reflects the standard of living across countries. In 2014, the International Comparison Program (ICP) released PPP data from 2011, the first update since 2005. This new data had implications for the global poverty line and for Bank estimates of the number of people living below this line; the use of $1.90 as the updated international poverty line reflects the 2011 PPP data and is comparable with previous global poverty estimates.

The report also examines shared prosperity using updated comparisons of household data on income growth; these data are comparable across countries.

Globally, progress on both goals has been significant but uneven, according to the Bank. Global poverty has declined over the past three decades, falling by approximately one percentage point annually since 1990. Rapid strides in poverty reduction in China and India have been a driving force behind this decline.

However, the extent of poverty reduction varies from region to region. In East Asia and the Pacific, the number of people in extreme poverty fell from 999.3 million in 1990 to 147.2 million in 2012, with a further predicted decline to 82.6 in 2015; for Latin America and the Caribbean, the number of people in extreme poverty was 78 million in 1990, 37.1 million in 2012, and 29.7 million in 2015. South Asia has seen more modest declines, from 574.5 million in 1990 to 309.2 in 2012, with a projected 231.3 in 2015. While this region is still home to one-third of the world’s poor, it has achieved more rapid poverty reduction than other regions (namely, SSA) over the past 30 years.

For Africa south of the Sahara, the numbers are a bit more complicated. Extreme poverty rose from 284 million people in 1990 to 388.5 million in 2012 and then dropped again in 2015 to 347.1. At the same time, SSA’s share in total global poverty has actually risen since 1990 due to drastic population increases, reaching 43 percent in 2012. The rate of poverty reduction in the region has also lagged behind global rates, falling only from 56 to 42.6 from 1990 to 2012; global poverty rates, on the other hand, fell from 37.1 to 12.8 during this period.

Progress on shared prosperity is equally varied. From 2007 to 2012, the incomes of the bottom 40 percent of the population (B40) increased in 65 out of the 94 countries with adequate data; among these, B40 incomes grew faster than the incomes of the average population in 47 countries, contributing to reductions in income inequality in these countries. However, several countries (including Madagascar, Togo, Malawi, Ethiopia, Senegal, Honduras, and Guatemala) saw B40 incomes fall between 2007 and 2012. In addition, B40 populations continue to lag significantly behind more well-off populations in terms of non-income dimensions, such as education, health, and living standards.

Clearly, while any progress on poverty and income inequality reduction is good news, 702 million people living on less than $1.90 a day is still an unacceptably high number. In addition, the report points out that poverty is becoming increasingly unequal, concentrated in stubbornly persistent geographical pockets. While the rate of people in extreme poverty is much higher in low-income countries, most of the world’s poor actually live in lower-middle-income countries; this is due in part to the fact that China, India, Indonesia, and Nigeria – all countries with large poor populations - have been re-classified as lower-middle-income. In addition, about 50 percent of the world’s poor live in countries classified as natural resource-based or fragile and conflict-affected.

The report also uses the Multidimensional Poverty Index (MPI), put forth by the Oxford Poverty and Human Development Initiative and the United Nations Development Programme, to examine the non-income dimensions of poverty around the world. The MPI is composed of 10 indicators grouped in three dimensions: education (including school attendance and years of education); health (including child mortality and nutrition); and other living standards (including access to electricity, sanitation, access to safe water, flooring and housing materials, cooking fuel, and household assets). The index covers 101 countries and 884 sub-national regions, mostly in SSA and South Asia.

According to the 2015 MPI, 1.6 billion people around the world suffer from non-income-based poverty. The largest share of people who are poor according to the MPI is found in South Asia, while SSA rates highest in terms of the intensity of deprivation. According to the MPI, intense poverty is also found in the Arab States, East Asia Pacific, Latin America and the Caribbean, and Europe and Central Asia, although the overall headcount of poor people is lower in these regions than in SSA and South Asia.

As with income-based poverty and shared prosperity, multi-dimensional poverty varies widely. The country with the highest rate of poverty (as defined in the MPI) in the world is Niger. However, the poorest sub-national area (meaning area smaller than country-level) in the world is found in Salamat in southeast Chad. Nearly 98 percent of Salamat’s 354,000 inhabitants are poor according to the MPI, deprived on average of 75 percent of the MPI dimensions.

These two definitions of poverty (income-based and multi-dimensional) demonstrate the importance of monitoring a variety of indicators that can affect short- and long-term opportunities, as populations can be affected by more than limited incomes. Policymakers will also need to address issues of sustainable growth and natural resource depletion to ensure that recent growth trends are able to continue into the future. The report calls for increased focus on broad-based growth, investment in human development and social protections, increased insurance against environmental and health risks for poor populations, and the inclusion of environmental sustainability and the protection of natural resources in future policymaking. The report also highlights five characteristics of countries whose economies have seen consistent growth for 25 years or more: effective leadership and governance; macroeconomic stability; orientation toward the future; openness to the global economy; and market orientation. By embracing these characteristics and improving data to address challenges at the regional, national, and sub-national levels, policymakers can make the twin goals of poverty reduction and shared prosperity a reality in the coming decades.

For more in-depth regional analysis of the report, visit our related blogs on the India Food Security Portal, the Central America and the Caribbean (CAC) Food Security Portal, and the Africa south of the Sahara (SSA) Food Security Portal.

BY: Sara Gustafson, IFPRI

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