Poverty is a global issue, but its measurement depends on the local context.
While poverty is a global concern, how we measure it is heavily influenced by local circumstances. Although the World Bank has set a global poverty line, in reality, each country still defines poverty in its own way.
This raises an important question: Why do poverty standards vary from one country to another? Shouldn’t there be a single, universal measurement?
The answer lies in differences in income levels, cost of living, and consumption patterns across countries.
Understanding the Poverty Line
In simple terms, the poverty line is the minimum level of income or expenditure needed for an individual to meet basic needs, such as food, clothing, and shelter. Anyone living below this line is considered poor.
The World Bank has established several categories of global poverty lines based on purchasing power parity (PPP), to make cross-country comparisons possible. The main standards are:
- US$2.15 per day (PPP 2017): Used to measure extreme poverty in low-income countries
- US$3.65 per day (PPP 2017): Applied to lower-middle-income countries
- US$6.85 per day (PPP 2017): Used in upper-middle-income countries such as Indonesia, Malaysia, and Thailand
However, countries do not automatically adopt these figures in their domestic policies. Why is that?
Why Poverty Lines Vary Globally
Each country has a different cost of living, and this significantly affects how poverty is defined. What US$2 can buy in Ethiopia is vastly different from what it can buy in Switzerland. As a result, wealthier countries tend to set higher national poverty lines that are more in line with the living standards of their citizens.
For instance, Ethiopia has a per capita income of around US$1,750, while Switzerland’s is approximately US$69,000 (adjusted for purchasing power parity), according to Our World in Data. This stark contrast reflects the wide disparity in economic conditions and purchasing power between the two nations.
Unsurprisingly, this gap is also reflected in their national poverty thresholds.
In Ethiopia, the poverty line is set at 7,184 birr per year (around US$53.37). In Switzerland, a person is considered poor if earning less than CHF 2,315 (around US$2,802) per month. For a family of two parents and two children, the threshold rises to CHF 4,051 (around US$4,903) per month.
These figures demonstrate that while global poverty standards exist, national poverty lines are more attuned to local perceptions of basic needs. Tailoring poverty thresholds to the local context is essential for developing policies that are both relevant and effective.
The World Bank’s Approach
To address this challenge, the World Bank uses a method called the harmonized poverty line. In this approach, national poverty line data are adjusted using purchasing power parity (PPP) to allow for meaningful international comparisons.
The World Bank then takes the median national poverty line from 37 upper-middle-income countries and uses it as a benchmark for the global poverty line.
However, changes in PPP calculations can have a major impact. For example, when the World Bank updated its PPP base year from 2011 to 2017, the extreme poverty line increased from US$1.90 to US$2.15 per day.
The impact was significant. In Indonesia, for instance, the number of people classified as poor rose from 54 million (based on PPP 2011) to 67 million (based on PPP 2017). In China, the increase was even more dramatic, with the number jumping from 24 million to 42 million.
Poverty Is Shifting to Middle-Income Countries
Interestingly, recent data from the World Bank shows that poverty is increasingly concentrated in middle-income countries. This shift is driven by two key factors:
- Revisions of national poverty lines that are rising in many developing nations.
- Large countries such as Indonesia, China, and Brazil have massive populations—so even small changes in poverty standards can significantly affect global statistics.
For example, due to a revision in the PPP-based poverty line, Indonesia recorded an increase of 13 million people classified as poor, while Nigeria saw a decrease of 14 million. This highlights how sensitive global poverty statistics are to both calculation methods and national population sizes.
Global Standards vs. Local Realities
The World Bank provides a global framework for measuring poverty, but local measurements remain indispensable. Each country has its own definition of what constitutes “a decent standard of living.”
Therefore, poverty rates between countries cannot be fairly compared using a single global benchmark.
In fact, these differences teach us that poverty reduction efforts cannot follow a one-size-fits-all model. Strategies must be tailored to each country’s specific needs and conditions, even as they contribute toward the shared goal of global well-being.
