Far more people around the world live in severe poverty than previously thought, with the global underclass now numbering an estimated 1,4 billion, up from around 1 billion, according to a landmark World Bank report released Tuesday.
The report does not suggest that the world has suddenly gotten poorer. In fact, it shows remarkable reductions in poverty levels since the 1980s.
Rather, the report represents a revised snapshot of global development using more recent household surveys, demographic figures, price data and purchasing power analyses.
The new figure was estimated after researchers at the Bank raised the threshold for extreme poverty from earnings of one US dollar (5 DKR) a day to a new level of 1,25 dollar (6,25 DKR) a day on the back of increased living costs.
The new figures are likely to put fresh pressure on big donor countries to move more aggressively to combat global poverty, and on countries to introduce more-effective policies to help lift the poorest.
Even so, the new estimates show how progress has been made in helping the poor over the past 25 years. In 1981, 1,9 billion people were living below the new 1,25 dollar a day poverty line.
The new estimates are based on updated global price data, and the revision to the poverty line shows the cost of living in the developing world is higher than had been thought. The data is based on 675 household surveys in 116 countries.
The Bank said its latest estimates show the number of poor had fallen from 52 percent of the developing worlds population in 1981 to 26 percent in 2005.
But it pointed out that at that rate of progress, about one billion people will still live below the 1,25 dollar poverty line in 2015. – It is sobering (alvorligt) that poverty is much more pervasive than expected, Justin Lin, the Banks Chief Economist, said in Washington.
The report, the World Banks most ambitious attempt ever to update its poverty estimates, suggests that while huge economic progress has been made around the world, many nations, including emerging juggernauts such as China, are not as rich as many had thought.
Roughly 1 billion people, or 79 percent of the population in East Asia, mostly in China, were living in severe poverty in 1981. The report estimates that figure fell to 337 million, or 18 percent of the region, by 2005.
No other region has come close to matching East Asias success.
By comparison, while the percentage of people living in severe poverty in South Asia and Latin America has indeed come down, those reductions have not kept pace with population growth.
As a result, there were actually more poor people living in those regions in 2005 than in the 1980s. The trend is worse in sub-Saharan Africa. There, the number of poor people jumped from 202 million in 1981 to 384 million in 2005.
KEY FACTS & ANALYSIS
– Over 1,2 million randomly sampled households were interviewed for the 2005 estimate, representing 96 per cent of the developing world. But lags in survey data availability mean that the new estimates do not yet reflect the potentially large adverse effects on poor people of rising food and fuel prices since 2005.
– The number of poor has fallen by 500 million since 1981 (from 52 percent of the developing worlds population in 1981 to 26 percent in 2005) and the world is still on track to halve the 1990 poverty rate by 2015.
But at this rate of progress, about a billion people will still live below 1,25 dollar a day in 2015. Also, most people who escaped 1,25 a day poverty over 1981-2005 would still be poor by middle-income country standards.
– In China, the number of people living on less than 1,25 dollar a day in 2005 prices has dropped from 835 million in 1981 to 207 million in 2005. The Banks earlier 2004 estimate had 130 million people living in China below one dollar a day based on 1993 PPP. Thus, the new calculations reveal more poor people than assumed earlier, but Chinas remarkable success in reducing poverty still stands.
NOTE on PPP: The comparative prices of goods and services (such as food, housing, transport and so on) across many countries, expressed as internationally comparable exchange rates known as purchasing power parities (PPPs).
– In the developing world outside China, the 1,25 dollar poverty rate has fallen from 40 percent to 29 percent over 1981-2005. However, given population growth, this progress was not enough to bring down the total number of poor outside China, which has stayed at about 1,2 billion.
– In South Asia, the 1,25 dollar 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 dollar 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 per cent in 1981 to 42 per cent in 2005.
– In Sub-Saharan Africa, the 1,25 dollar a day rate was 50 percent in 2005 – the same as it was in 1981, after rising, then falling during the period. The number of poor has almost doubled, from 200 million in 1981 to about 380 million in 2005. If the trend persists, a third of the worlds poor will live in Africa by 2015.
Average consumption among poor people in Sub-Saharan Africa stood at a meager 70 cents a day in 2005. Given that poverty is so deep in Africa, even higher growth will be needed than for other regions to have the same impact on poverty.
– For middle income countries (lidt rigere u-lande) the median poverty line for all developing countries – two dollar a day – is more suitable. 2,6 billion people lived on less than two dollar a day in 2005 – a number largely unchanged since 1981. This suggests less progress in crossing the two dollar a day hurdle.
By this measure, the poverty rate has fallen over 1981-2005 in Latin America and the Middle East and North Africa, but not enough to bring down the total number of poor. The two dollar a day poverty rate has risen in Eastern Europe and Central Asia, though with signs of progress since the late 1990s.
The new poverty data is available at http://econ.worldbank.org/research
and ICP data is available www.worldbank.org/data/icp
