How is poverty measured?

At Concern, we talk a lot about people who live on less than $2.15 per day. This is also known as the international poverty line. But why is it such a specific number? Who decides on that figure? Why do we measure in dollars versus Euros? And does that mean that people who live on $2.16 a day have nothing to worry about? 

Measuring poverty isn’t as easy as dollars in and dollars out, and there isn’t one single way of determining a country’s poverty (or an individual’s for that matter). But the international poverty line is one key tool for us to track progress over time. Read on for more.

Set by the World Bank, the international poverty line (IPL) is a monetary threshold used to determine an “adequate” level of income. If a person falls under that threshold, they’re considered to be living in poverty. 

No. The IPL is a global absolute minimum; however, it takes into consideration national poverty lines. National poverty thresholds usually take into consideration the amount a person needs for the minimum acceptable amount of shelter, food, and clothing and can fluctuate based on the economies of each country. 

For example, the national poverty threshold in Ireland is 60% of the median household income, which works out to €45.33 per day (€317.33 per week). This is lower than the poverty line for the United Kingdom (which is also calculated as 60% of the median household income, and works out to roughly €73.19 per day). However, it’s more than five times the threshold for Pakistan (€9.96 per day), nearly eight times the threshold for Ukraine (€6.29 per day), and more than 150 times the national poverty threshold for Rwanda (€0.30 per day). 

Because we have no common denominator, these differences make it difficult to measure global poverty based on national poverty lines.

In 1990, the World Bank (working alongside independent researchers) calculated a common denominator using purchasing power parity (PPP) exchange rates. These are the rates that measure the price of specific goods in different countries, as well as the literal “purchasing power” (e.g., how much you can buy)  of each currency. They then converted these PPP rates to a common currency: the US dollar. 

The first IPL was set at $1 USD per day, which was the general threshold across low-income countries for being able to meet one’s most basic needs. 

If you’ve been following Concern’s work for a while, you may be wondering about what happened to the figure of living on $1.90 per day. The international poverty line isn’t set in stone and has risen gradually over the last 35 years. It shifted from $1.90 to $2.15 in 2022. 

These changes are due to inflation and economic shifts. Often, the changes are also due to the World Bank being able to access more data from more countries, giving them a more accurate understanding of global poverty. For instance, the $1.90 figure was based on data from 15 low-income countries. The World Bank based its latest figure of $2.15 on data from nearly twice as many countries (28).

$2.15 per person per day is what the World Bank calls the “global absolute minimum.” 

However, they also set two other poverty thresholds to account for the differences in national economies, including lower-middle income countries (countries where the per capita gross national income is between $1,136 and $4,465) and upper-middle-income countries ($4,466 and $13,845). 

For lower-middle income countries (including Bangladesh and Pakistan), the IPL is $3.65 per day. In upper-middle income countries (like Iraq and Ukraine), it’s $6.85. 

We manage what we measure. Ending poverty sustainably means we have to be able to measure progress within countries and between countries to know what is working and where improvements need to be made. 

The fact that the IPL is dynamic is also an important piece of the puzzle. Not every country updates its national threshold regularly. Keeping a poverty level lower than the current average can create a false sense that poverty has been eradicated in an area or a country. We like to celebrate progress being made, but this can be misleading — especially for people who are often the furthest behind and left out of conversations and decision-making sessions. For example, in Malawi, the national poverty rate in 2023 was 70%. However, in the country’s urban areas, that rate fell to 30%. In rural areas, it was slightly higher: 77%. 

The IPL helps us to measure effectively, catching these inequalities and also ensuring that we’re actually ending poverty (on paper and in practice).

That said, the international poverty line isn’t perfect. Poverty defines a person’s economic situation at a specific moment in time. It’s also a very multifaceted concept that goes beyond numbers. A few of the key factors that we also use to measure poverty include many of the areas where Concern works: health, hunger, education, gender equality, access to clean water, and other infrastructural issues like electricity and sanitation services.

This is what the World Bank has defined as multidimensional poverty, which measures not only the monetary aspects of poverty, but also the other issues that need to be addressed in order to sustainably end poverty. Our goal isn’t to just end poverty for a specific moment in time; it’s to end poverty for good. In order to do that, we look at what types of poverty — or what cycles of poverty — affect countries, communities, and families to determine what’s needed to help people withstand the different risks and hazards that can set them back financially without losing everything.