The ethical poverty line: a better measure of global poverty

The ethical poverty line: a better measure of global poverty

The ethical poverty line: a better measure of global poverty

The standard poverty line measure of US$1-a-day is unrealistically low. It disguises the real level of global poverty and understates the challenge of eliminating poverty. A poverty line of between US$2 and US$3-a-day would provide a more adequate measure of well-being and a truer estimate of the cost of eliminating poverty.

Research reported in thejournal Third World Quarterly, uses predominantly the same survey data that theWorld Bank uses to estimate global poverty levels,  and presents an alternative to the US$1-a-dayline. The standard poverty line is simply an average of a limited number ofnational poverty lines; it is not based on well-being outcomes or on anyassessment of basic needs. The research draws on existing work on well-beingmeasures and life-expectancy to identify an Ethical Poverty Line (EPL).

The EPL is an incomethreshold below which life expectancy falls rapidly as income falls; and abovewhich life expectancy rises only very slightly with increased income. It isenough income for the average global citizen to live a full lifespan. Theresearch identifies a global ethical poverty line (global EPL) of US$2.7-a-day.The research also identifies a lower EPL (minimum EPL) of US$1.9-a-day byexcluding countries in sub-Saharan Africa (to reducethe impact of problems such as AIDS and civil war on the calculation).

Key findings include:

  • The minimum EPLmore than doubles the number of people considered to be living in poverty to2.5 billion (40 percent of the world’s population).
  • The global EPLindicates that 3 billion people (50 percent of the world’s population) areliving in poverty.
  • Assuming economicgrowth remains at current levels, the cost of removing poverty at the minimumEPL level would equal a 30 percent tax on all earnings above average US levels. This would affect half the US population and one-third of people in the UK.
  • The cost ofremoving poverty at the global EPL level would equal a 30 percent tax on earningsfor four-fifths of the US population and almost three-quarters of the UK population.

Reducing global poverty asdefined by the EPL through economic growth would require growth levels that areprobably unachievable and unsustainable. Recent experience has also shown thatgrowth alone is not enough to reduce poverty. During the 1990s, most of thebenefits from global economic growth went to an emerging global middle class(mostly located in China) and the rich; poor people benefited little.

The alternative to moreeconomic growth to reduce poverty is a more extensive redistribution ofexisting resources. The redistribution implications of the EPL are thereforemuch more politically challenging than those of the standard US$1-a-day povertyline.

The author concludes that:

  • Eliminatingpoverty at the EPL level would necessitate a substantial loss of income bymiddle-class residents of developed countries to allow an adequate increase inincome for the poorest people in the world.
  • Deep structuralinequalities between rich and poor countries (for example in the distributionof global economic growth) would need to be addressed.
  • The EPL also encouragescitizens of rich countries to address issues of over-consumption.