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Graph of global population living on under 1, 1.25 and 2 equivalent of 2005 US dollars daily (red) and as a proportion of world population (blue) based on 1981–2008 World Bank data[needs update]
Poverty thresholds for 2013

The poverty threshold, poverty limit, poverty line, or breadline[1] is the minimum level of income deemed adequate in a particular country.[2] The poverty line is usually calculated by estimating the total cost of one year's worth of necessities for the average adult.[3] The cost of housing, such as the rent for an apartment, usually makes up the largest proportion of this estimate, so economists track the real estate market and other housing cost indicators as a major influence on the poverty line.[4] Individual factors are often used to account for various circumstances, such as whether one is a parent, elderly, a child, married, disabled, etc. The poverty threshold may be adjusted annually. In practice, like the definition of poverty, the official or common understanding of the poverty line is significantly higher in developed countries than in developing countries.[5][6]

In September 2022, the World Bank updated the International Poverty Line (IPL), a global absolute minimum, to $2.15 per day[7] (in PPP). In addition, as of 2022, $3.65 per day in PPP for lower-middle income countries, and $6.85 per day in PPP for upper-middle income countries.[8][9] Per the $1.90/day standard, the percentage of the global population living in absolute poverty fell from over 80% in 1800 to 10% by 2015, according to United Nations estimates, which found roughly 734 million people remained in absolute poverty.[10][11]

History

[edit]

Charles Booth, a pioneering investigator of poverty in London at the turn of the 20th century, popularised the idea of a poverty line, a concept originally conceived by the London School Board.[12] Booth set the line at 10 (50p) to 20 shillings (£1) per week, which he considered to be the minimum amount necessary for a family of four or five people to subsist on.[13] Seebohm Rowntree (1871–1954), a British sociological researcher, social reformer and industrialist, surveyed rich families in York, and drew a poverty line in terms of a minimum weekly sum of money "necessary to enable families … to secure the necessaries of a healthy life", which included fuel and light, rent, food, clothing, and household and personal items. Based on data from leading nutritionists of the period, he calculated the cheapest price for the minimum calorific intake and nutritional balance necessary, before people get ill or lose weight. He considered this amount to set his poverty line and concluded that 27.84% of the total population of York lived below this poverty line.[14] This result corresponded with that from Booth's study of poverty in London and so challenged the view, commonly held at the time, that abject poverty was a problem particular to London and was not widespread in the rest of Britain. Rowntree distinguished between primary poverty, those lacking in income and secondary poverty, those who had enough income, but spent it elsewhere (1901:295–96).[14]

The poverty threshold was first developed by Mollie Orshansky between 1963 and 1964. She attributed the poverty threshold as a measure of income inadequacy by taking the cost of food plan per family of three or four and multiplying it by a factor of three. In 1969 the inter agency poverty level review committee adjusted the threshold for only price changes.[15]

Absolute poverty and the International Poverty Line

[edit]
See also: Extreme poverty

The term "absolute poverty" is also sometimes used as a synonym for extreme poverty. Absolute poverty is the absence of enough resources to secure basic life necessities.

Poverty headcount ratio at $1.90 a day (2011 PPP) (% of population). Based on World Bank data ranging from 1998 to 2018.[16]

To assist in measuring this, the World Bank has a daily per capita international poverty line (IPL), a global absolute minimum, of $2.15 a day as of September 2022.[17]

The new IPL replaces the $1.25 per day figure, which used 2005 data.[18] In 2008, the World Bank came out with a figure (revised largely due to inflation) of $1.25 a day at 2005 purchasing power parity (PPP).[19] The new figure of $1.90 is based on ICP PPP calculations and represents the international equivalent of what $1.90 could buy in the US in 2011. Most scholars agree that it better reflects today's reality, particularly new price levels in developing countries.[20] The common IPL has in the past been roughly $1 a day.[21]

These figures are artificially low according to Peter Edward of Newcastle University. He believes the real number as of 2015 was $7.40 per day.[22]

Using a single monetary poverty threshold is problematic when applied worldwide, due to the difficulty of comparing prices between countries.[citation needed] Prices of the same goods vary dramatically from country to country; while this is typically corrected for by using PPP exchange rates, the basket of goods used to determine such rates is usually unrepresentative of the poor, most of whose expenditure is on basic foodstuffs rather than the relatively luxurious items (washing machines, air travel, healthcare) often included in PPP baskets. The economist Robert C. Allen has attempted to solve this by using standardized baskets of goods typical of those bought by the poor across countries and historical time, for example including a fixed calorific quantity of the cheapest local grain (such as corn, rice, or oats).[23]

Basic needs

[edit]
See also: Basic needs

The basic needs approach is one of the major approaches to the measurement of absolute poverty in developing countries. It attempts to define the absolute minimum resources necessary for long-term physical well-being, usually in terms of consumption goods. The poverty line is then defined as the amount of income required to satisfy those needs. The 'basic needs' approach was introduced by the International Labour Organization's World Employment Conference in 1976.[24][25] "Perhaps the high point of the WEP was the World Employment Conference of 1976, which proposed the satisfaction of basic human needs as the overriding objective of national and international development policy. The basic needs approach to development was endorsed by governments and workers' and employers' organizations from all over the world. It influenced the programs and policies of major multilateral and bilateral development agencies, and was the precursor to the human development approach."[24][25]

A traditional list of immediate "basic needs" is food (including water), shelter, and clothing.[26] Many modern lists emphasize the minimum level of consumption of 'basic needs' of not just food, water, and shelter, but also sanitation, education, and health care. Different agencies use different lists. According to a UN declaration that resulted from the World Summit on Social Development in Copenhagen in 1995, absolute poverty is "a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education, and information. It depends not only on income, but also on access to services."[27]

David Gordon's paper, "Indicators of Poverty and Hunger", for the United Nations, further defines absolute poverty as the absence of any two of the following eight basic needs:[27]

A homeless man seeks shelter under a public bench.
  • Food: Body mass index must be above 16.
  • Safe drinking water: Water must not come solely from rivers and ponds, and must be available nearby (fewer than 15 minutes' walk each way).
  • Sanitation facilities: Toilets or latrines must be accessible in or near the home.
  • Health: Treatment must be received for serious illnesses and pregnancy.
  • Shelter: Homes must have fewer than four people living in each room. Floors must not be made of soil, mud, or clay.
  • Education: Everyone must attend school or otherwise learn to read.
  • Information: Everyone must have access to newspapers, radios, televisions, computers, or telephones at home.
  • Access to services: This item is undefined by Gordon, but normally is used to indicate the complete panoply of education, health, legal, social, and financial (credit) services.

In 1978, Ghai investigated the literature that criticized the basic needs approach. Critics argued that the basic needs approach lacked scientific rigour; it was consumption-oriented and antigrowth. Some considered it to be "a recipe for perpetuating economic backwardness" and for giving the impression "that poverty elimination is all too easy".[28] Amartya Sen focused on 'capabilities' rather than consumption.

In the development discourse, the basic needs model focuses on the measurement of what is believed to be an eradicable level of poverty.

Relative poverty

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See also: Economic inequality and Relative deprivation
The blue bars represent the amount of money made by different people. The thin red line shows the relative poverty level. Anyone earning less than that, in this society, is relatively poor.

Relative poverty means low income relative to others in a country:[29] for example, below 60% of the median income of people in that country.

Relative poverty measurements, unlike absolute poverty measurements, take the social economic environment of the people observed into consideration. It is based on the assumption that whether a person is considered poor depends on her/his income share relative to the income shares of other people who are living in the same economy.[29] The threshold for relative poverty is considered to be at 50% of a country's median equivalised disposable income after social transfers. Thus, it can vary greatly from country to country even after adjusting for purchasing power standards (PPS).[30]

A person can be poor in relative terms but not in absolute terms as the person might be able to meet her/his basic needs, but not be able to enjoy the same standards of living that other people in the same economy are enjoying.[31] Relative poverty is thus a form of social exclusion that can for example affect peoples access to decent housing, education or job opportunities.[31]

The relative poverty measure is used by the United Nations Development Program (UNDP), the United Nations Children's Fund (UNICEF), the Organisation for Economic Co-operation and Development (OECD) and Canadian poverty researchers.[32][33][34][35][36] In the European Union, the "relative poverty measure is the most prominent and most–quoted of the EU social inclusion indicators."[37]

"Relative poverty reflects better the cost of social inclusion and equality of opportunity in a specific time and space."[38]

"Once economic development has progressed beyond a certain minimum level, the rub of the poverty problem – from the point of view of both the poor individual and of the societies in which they live – is not so much the effects of poverty in any absolute form but the effects of the contrast, daily perceived, between the lives of the poor and the lives of those around them. For practical purposes, the problem of poverty in the industrialized nations today is a problem of relative poverty (page 9)."[38][39]

However, some [who?] have argued that as relative poverty is merely a measure of inequality, using the term 'poverty' for it is misleading. For example, if everyone in a country's income doubled, it would not reduce the amount of 'relative poverty' at all.

History of the concept of relative poverty

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In 1776, Adam Smith argued that poverty is the inability to afford "not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without."[40][41]

In 1958, John Kenneth Galbraith argued, "People are poverty stricken when their income, even if adequate for survival, falls markedly behind that of their community."[41][42]

In 1964, in a joint committee economic President's report in the United States, Republicans endorsed the concept of relative poverty: "No objective definition of poverty exists. ... The definition varies from place to place and time to time. In America as our standard of living rises, so does our idea of what is substandard."[41][43]

In 1965, Rose Friedman argued for the use of relative poverty claiming that the definition of poverty changes with general living standards. Those labelled as poor in 1995, would have had "a higher standard of living than many labelled not poor" in 1965.[41][44]

In 1967, American economist Victor Fuchs proposed that "we define as poor any family whose income is less than one-half the median family income."[45] This was the first introduction of the relative poverty rate as typically computed today[46][47]

In 1979, British sociologist, Peter Townsend published his famous definition: "individuals... can be said to be in poverty when they lack the resources to obtain the types of diet, participate in the activities and have the living conditions and amenities which are customary, or are at least widely encouraged or approved, in the societies to which they belong (page 31)."[48]

Brian Nolan and Christopher T. Whelan of the Economic and Social Research Institute (ESRI) in Ireland explained that "poverty has to be seen in terms of the standard of living of the society in question."[49]

Relative poverty measures are used as official poverty rates by the European Union, UNICEF and the OECD. The main poverty line used in the OECD and the European Union is based on "economic distance", a level of income set at 60% of the median household income.[50]

Relative poverty compared with other standards

[edit]

A measure of relative poverty defines "poverty" as being below some relative poverty threshold. For example, the statement that "those individuals who are employed and whose household equivalised disposable income is below 60% of national median equivalised income are poor" uses a relative measure to define poverty.[51]

The term relative poverty can also be used in a different sense to mean "moderate poverty" – for example, a standard of living or level of income that is high enough to satisfy basic needs (like water, food, clothing, housing, and basic health care), but still significantly lower than that of the majority of the population under consideration. An example of this could be a person living in poor conditions or squalid housing in a high crime area of a developed country and struggling to pay their bills every month due to low wages, debt or unemployment. While this person still benefits from the infrastructure of the developed country, they still endure a less than ideal lifestyle compared to their more affluent countrymen or even the more affluent individuals in less developed countries who have lower living costs.[52]

Living Income Concept

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Living Income refers to the income needed to afford a decent standard of living in the place one lives. The distinguishing feature between a living income and the poverty line is the concept of decency, wherein people thrive, not only survive. Based on years of stakeholder dialogue and expert consultations, the Living Income Community of Practice, an open learning community, established the formal definition of living income drawing on the work of Richard and Martha Anker, who co-authored "Living Wages Around the World: Manual for Measurement". They define a living income as:[53]

The net annual income required for a household in a particular place to afford a decent standard of living for all members of that household. Elements of a decent standard of living include food, water, housing, education, healthcare, transport, clothing, and other essential needs including provision for unexpected events.

Like the poverty line calculation, using a single global monetary calculation for Living Income is problematic when applied worldwide.[54] Additionally, the Living Income should be adjusted quarterly due to inflation and other significant changes such as currency adjustments.[53] The actual income or proxy income can be used when measuring the gap between initial income and the living income benchmarks. The World Bank notes that poverty and standard of living can be measured by social perception as well, and found that in 2015, roughly one-third of the world's population was considered poor in relation to their particular society.[55]

The Living Income Community of Practice (LICOP) was founded by The Sustainable Food Lab, GIZ and ISEAL Alliance to measure the gap between what people around the world earn versus what they need to have a decent standard of living, and find ways to bridge this gap.[53]

A variation on the LICOP's Living Income is the Massachusetts Institute of Technology's Living Wage Calculator, which compares the local minimum wage to the amount of money needed to cover expenses beyond what is needed to merely survive across the United States.[56] The cost of living varies greatly if there are children or other dependents in the household.

Relevance

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An outdated or flawed poverty measure is an obstacle for policymakers, researchers and academics trying to find solutions to the problem of poverty. This has implications for people. The federal poverty line is used by dozens of federal, state, and local agencies, as well as several private organizations and charities, to decide who needs assistance. The assistance can take many forms, but it is often difficult to put in place any type of aid without measurements which provide data. In a rapidly evolving economic climate, poverty assessment often aids developed countries in determining the efficacy of their programs and guiding their development strategy. In addition, by measuring poverty one receives knowledge of which poverty reduction strategies work and which do not,[57] helping to evaluate different projects, policies and institutions. To a large extent, measuring the poor and having strategies to do so keep the poor on the agenda, making the problem of political and moral concern.

Threshold limitations

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Global income distribution over time (Our World in Data). The chart shows a significant shift of incomes toward higher levels.

It is hard to have exact number for poverty, as much data is collected through interviews, meaning income that is reported to the interviewer must be taken at face value.[58] As a result, data could not rightly represent the situations true nature, nor fully represent the income earned illegally. In addition, if the data were correct and accurate, it would still not mean serving as an adequate measure of the living standards, the well-being or economic position of a given family or household. Research done by Haughton and Khandker[59] finds that there is no ideal measure of well-being, arguing that all measures of poverty are imperfect. That is not to say that measuring poverty should be avoided; rather, all indicators of poverty should be approached with caution, and questions about how they are formulated should be raised.

As a result, depending on the indicator of economic status used, an estimate of who is disadvantaged, which groups have the highest poverty rates, and the nation's progress against poverty varies significantly. Hence, this can mean that defining poverty is not just a matter of measuring things accurately, but it also necessitates fundamental social judgments, many of which have moral implications.

National poverty lines

[edit]
2008 CIA World Factbook-based map showing the percentage of population by country living below that country's official poverty line

National estimates are based on population-weighted subgroup estimates from household surveys. Definitions of the poverty line do vary considerably among nations. For example, rich nations generally employ more generous standards of poverty than poor nations. Even among rich nations, the standards differ greatly. Thus, the numbers are not comparable among countries. Even when nations do use the same method, some issues may remain.[60]

Poland

[edit]
Main article: Poverty in Poland

According to Statistics Poland, the proportion of the population living below the national extreme poverty (minimum subsistence) threshold was 4.2% as of 2019. This is approximately 22% or 1.2 percentage points lower than the previous year. In the fourth quarter of 2019, for single-person households, this threshold was set at 614 zł per month (~20.17 zł per day, equivalent to ~€4.71 or ~$5.21 per day at the time).[61]

United Kingdom

[edit]
See also: Poverty in the United Kingdom

In the UK in 2006, "more than five million people – over a fifth (23 percent) of all employees – were paid less than £6.67 an hour". This value is based on a low pay rate of 60 percent of full-time median earnings, equivalent to a little over £12,000 a year for a 35-hour working week. In April 2006, a 35-hour week would have earned someone £9,191 a year – before tax or National Insurance".[62][63]

In 2019, the Low Pay Commission estimated that about 7% of people employed in the UK were earning at or below the National Minimum Wage.[64] In 2021, the Office for National Statistics found that 3.8% of jobs were paid below the National Minimum Wage, a decrease from 7.4% in 2020 but an increase from 1.4% in 2019.[65] They note that this increase from 2019 to 2021 is connected to the COVID-19 pandemic in the United Kingdom.[65] The Guardian reported in 2021 that "almost 5m jobs, or one in six nationally, pay below the real living wage".[66]

India

[edit]
See also: Poverty in India
India
Poverty rate map of India by prevalence in 2000, among its states and union territories

India's official poverty level as of 2005 is split according to rural versus urban thresholds. For urban dwellers, the poverty line is defined as living on less than 538.60 rupees (approximately US$12) per month, whereas for rural dwellers, it is defined as living on less than 356.35 rupees per month (approximately US$7.50)[67] In 2019, the Indian government stated that 6.7% of its population is below its official poverty limit. As India is one of the fastest-growing economies in 2018, poverty is on the decline in the country, with close to 44 Indians escaping extreme poverty every minute, as per the World Poverty Clock. India lifted 271 million people out of poverty in a 10-year time period from 2005/06 to 2015/16.[68]

Iran

[edit]

In 2008 Iran government report by central statistics had recommended 9.5 around million people living below poverty line.[69] As of August 2022 the Iranian economy suffered the highest inflation in 75 years; official statistics put the poverty line at 10 million tomans ($500), while the minimum wage given in the same year has been 5 million toman.[70][71]

Singapore

[edit]

Singapore has experienced strong economic growth over the last ten years[when?] and has consistently ranked among the world's top countries in terms of GDP per capita.

Inequality has however increased dramatically over the same time span, yet there is no official poverty line in the country. Given Singapore's high level of growth and prosperity, many believe that poverty does not exist in the country, or that domestic poverty is not comparable to global absolute poverty. Such a view persists for a selection of reasons, and since there is no official poverty line, there is no strong acknowledgement that it exists.[72]

Yet, Singapore is not considering establishing an official poverty line, with Minister for Social and Family Development Chan Chun Sing claiming it would fail to represent the magnitude and scope of problems faced by the poor. As a result, social benefits and aids aimed at the poor would be a missed opportunity for those living right above such a line.[73]

United States

[edit]
See also: Poverty in the United States

In the United States, the poverty thresholds are updated every year by Census Bureau. The threshold in the United States is updated and used for statistical purposes. The poverty guidelines are also used as an eligibility criterion by Medicaid and a number of other Federal programs.[74]

In 2020, in the United States, the poverty threshold for a single person under 65 was an annual income of $12,760, or about $35 per day. The threshold for a family group of four, including two children, was $26,200, about $72 per day.[74] According to the US Census Bureau's American Community Survey 2018 One-year Estimates, 13.1% of Americans lived below the poverty line.[75] Other estimates place the percentage of people living in poverty as low as only 1.1% in 2017.[76]

Women and children

[edit]

Women and children find themselves impacted by poverty more often when a part of single mother families.[77] The poverty rate of women has increasingly exceeded that of men's.[78] While the overall poverty rate is 12.3%, women poverty rate is 13.8% which is above the average and men are below the overall rate at 11.1%.[79][77] Women and children (as single mother families) find themselves as a part of low class communities because they are 21.6% more likely to fall into poverty. However, extreme poverty, such as homelessness, disproportionately affects males to a high degree.[80]

Racial minorities

[edit]

A minority group is defined as "a category of people who experience relative disadvantage as compared to members of a dominant social group."[81] Minorities are traditionally separated into the following groups: African Americans, American Indians, Alaska Natives, Asians, Pacific Islanders, and Hispanics.[82] According to US Poverty statistics, Black Americans – 21%, Foreign born non-citizens – 19%, Hispanic Americans – 18%, and adults with a disability – 25%.[83] This does not include all minority groups, but these groups alone account for 85% of people under the poverty line in the United States.[84] White Americans have a poverty rate of 8.7%; the poverty rate is more than double for Black and Hispanic Americans.[85]

Impacts on education

[edit]

Living below the poverty threshold can have a major impact on a child's education.[86] The psychological stresses induced by poverty may affect a student's ability to perform well academically.[86] In addition, the risk of poor health is more prevalent for those living in poverty.[86] Health issues commonly affect the extent to which one can continue and fully take advantage of their education.[86] Poor students in the United States are more likely to dropout of school at some point in their education.[86] Research has also found that children living in poverty perform poorly academically and have lower graduation rates.[86] Impoverished children also experience more disciplinary issues in school than others.[86]

Schools in impoverished communities usually do not receive much funding, which can also set their students apart from those living in more affluent neighborhoods.[86] There is much dispute over whether upward mobility that brings a child out of poverty may or may not have a significant positive impact on their education; inadequate academic habits that form as early as preschool typically are unknown to improve despite changes in socioeconomic status.[86]

Impacts on healthcare

[edit]

The nation's poverty threshold is issued by the Census Bureau.[87] According to the Office of Assistant Secretary for Planning and Evaluation the threshold is statistically relevant and can be a solid predictor of people in poverty.[87] The reasoning for using Federal Poverty Level (FPL) is due to its action for distributive purposes under the direction of Health and Human Services. So FPL is a tool derived from the threshold but can be used to show eligibility for certain federal programs.[87] Federal poverty levels have direct effects on individuals' healthcare. In the past years and into the present government, the use of the poverty threshold has consequences for such programs like Medicaid and the Children's Health Insurance Program.[88]  The benefits which different families are eligible for are contingent on FPL. The FPL, in turn, is calculated based on federal numbers from the previous year.[88]

The benefits and qualifications for federal programs are dependent on number of people on a plan and the income of the total group.[88] For 2019, the U.S. Department of Health & Human Services enumerate what the line is for different families. For a single person, the line is $12,490 and up to $43,430 for a family of 8, in the lower 48 states.[87] Another issue is reduced-cost coverage. These reductions are based on income relative to FPL, and work in connection with public health services such as Medicaid.[89] The divisions of FPL percentages are nominally, above 400%, below 138% and below 100% of the FPL.[89] After the advent of the American Care Act, Medicaid was expanded on states bases.[89] For example, enrolling in the ACA kept the benefits of Medicaid when the income was up to 138% of the FPL.[89]

Poverty mobility and healthcare

[edit]

Health Affairs along with analysis by Georgetown found that public assistance does counteract poverty threats between 2010 and 2015.[90] In regards to Medicaid, child poverty is decreased by 5.3%, and Hispanic and Black poverty by 6.1% and 4.9% respectively.[90] The reduction of family poverty also has the highest decrease with Medicaid over other public assistance programs.[90] Expanding state Medicaid decreased the amount individuals paid by an average of $42, while it increased the costs to $326 for people not in expanded states. The same study analyzed showed 2.6 million people were kept out of poverty by the effects of Medicaid.[90] From a 2013–2015 study, expansion states showed a smaller gap in health insurance between households making below $25,000 and above $75,000.[91] Expansion also significantly reduced the gap of having a primary care physician between impoverished and higher income individuals.[91] In terms of education level and employment, health insurance differences were also reduced.[91] Non-expansion also showed poor residents went from a 22% chance of being uninsured to 66% from 2013 to 2015.[91]

Poverty dynamics

[edit]

Living above or below the poverty threshold is not necessarily a position in which an individual remains static.[92] As many as one in three impoverished people were not poor at birth; rather, they descended into poverty over the course of their life.[86] Additionally, a study which analyzed data from the Panel Study of Income Dynamics (PSID) found that nearly 40% of 20-year-olds received food stamps at some point before they turned 65.[93] This indicates that many Americans will dip below the poverty line sometime during adulthood, but will not necessarily remain there for the rest of their life.[93] Furthermore, 44% of individuals who are given transfer benefits (other than Social Security) in one year do not receive them the next.[92] Over 90% of Americans who receive transfers from the government stop receiving them within 10 years, indicating that the population living below the poverty threshold is in flux and does not remain constant.[92]

Cutoff issues

[edit]

Most experts and the public agree that the official poverty line in the United States is substantially lower than the actual cost of basic needs. In particular, a 2017 Urban Institute study found that 61% of non-elderly adults earning between 100 and 200% of the poverty line reported at least one material hardship, not significantly different from those below the poverty line. The cause of the discrepancy is believed to be an outdated model of spending patterns based on actual spending in the year 1955; the number and proportion of material needs has risen substantially since then.

Variability
[edit]

The US Census Bureau calculates the poverty line the same throughout the US regardless of the cost-of-living in a state or urban area. For instance, the cost-of-living in California, the most populous state, was 42% greater than the US average in 2010, while the cost-of-living in Texas, the second-most populous state, was 10% less than the US average.[citation needed] In 2017, California had the highest poverty rate in the country when housing costs are factored in, a measure calculated by the Census Bureau known as "the supplemental poverty measure".[94]

Government transfers to alleviate poverty

[edit]

In addition to wage and salary income, investment income and government transfers such as SNAP (Supplemental Nutrition Assistance Program, also known as food stamps) and housing subsidies are included in a household's income. Studies measuring the differences between income before and after taxes and government transfers, have found that without social support programs, poverty would be roughly 30% to 40% higher than the official poverty line indicates.[95][96]

See also

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References

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Further reading

[edit]
[edit]
Revisions and contributorsEdit on WikipediaRead on Wikipedia

Poverty threshold

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from Grokipedia
The poverty threshold is the minimum level deemed sufficient to cover essential needs such as , , and for a of a given size and composition, serving as a benchmark to classify individuals or families as living in . In practice, these thresholds are calculated using absolute measures anchored to the cost of a basic consumption basket, though they differ across nations due to variations in living costs and policy priorities. In the United States, the official thresholds originated in the from Mollie Orshansky's method, which multiplied the cost of a minimal plan by three—reflecting the era's average family expenditure share on —and are updated solely for inflation via the without geographic adjustments. Globally, the Bank's international poverty line for stands at $3.00 per person per day in 2021 purchasing power parity terms as of 2025, designed to represent the median of national poverty lines in low-income countries and track severe material deprivation. Key controversies surround these metrics' fixed nature, which critics argue fails to account for modern non-food essentials like healthcare or regional housing costs, and the superiority of absolute over relative thresholds— the latter tying to a fraction of , potentially conflating deprivation with inequality even as absolute living standards rise. Despite such debates, poverty thresholds inform eligibility for welfare programs and guide empirical assessments of economic hardship, underscoring their role in policy despite methodological limitations.

Conceptual Foundations

Absolute Poverty Threshold

The absolute poverty threshold defines a fixed minimum level of or consumption required to meet basic human needs, such as adequate , , and , independent of prevailing societal standards or income distributions. This approach contrasts with relative measures by anchoring the threshold to objective physiological and survival requirements, often derived from the cost of a minimal basket providing essential calories—typically around 2,100 per day for an adult—plus allowances for non-food essentials like and utilities. Thresholds are adjusted over time solely for or (PPP) changes, not for shifts in social norms or economic growth, enabling consistent tracking of deprivation across eras and regions. ![Global extreme poverty headcount at $1.90 a day (historical data)][center] Internationally, the World Bank's extreme poverty line serves as a benchmark absolute threshold, originally set at $1.08 per day in 1990 (1985 PPP), revised to $1.90 in 2011 (2005 PPP), then $2.15 in 2022 (2017 PPP), and updated to $3.00 per day in June 2025 (2021 PPP) to reflect median national lines from the poorest countries and improved price data. This metric, expressed in PPP terms to account for cost-of-living differences, identifies individuals unable to afford a standardized bundle of goods meeting basic needs; as of 2022 estimates under the prior line, approximately 648 million people—8% of the global population—lived below it, with projections showing further declines due to economic growth in low-income regions. In practice, national adaptations vary: India's absolute line, for instance, incorporates state-specific rural-urban costs for a 2,400-calorie diet plus minimal non-food items, set at roughly ₹32 per day in rural areas as of early 2010s data. In the United States, the official poverty thresholds, established in 1963–1964 by economist Mollie Orshansky, represent an absolute measure rooted in the cost of a Department of Agriculture economy food plan (providing minimal nutrition) multiplied by three to cover other necessities, yielding $3,000 annually for an urban family of four in 1964 dollars. These thresholds, updated annually for inflation via the but not for altered consumption patterns or expanded needs like healthcare, stood at $30,000 for a family of four in 2023. The measure's fixed methodology has facilitated longitudinal analysis, revealing a U.S. rate of 11.5% in 2022, affecting 37.9 million people, though critics argue it understates modern deprivations by excluding in-kind transfers and regional cost variations. Absolute thresholds excel in capturing biological necessities and enabling cross-country comparisons of survival-level hardship, as evidenced by global extreme poverty falling from over 40% in 1981 to under 10% by 2015 under prior benchmarks, driven by gains and market reforms in . However, limitations include insensitivity to non-income factors like access to clean water or , potential underestimation of hidden costs in informal economies, and challenges in verifying consumption via household surveys, which may underreport in conflict zones. Empirical adjustments, such as incorporating multidimensional indicators beyond , have been proposed to refine absolute assessments without relativizing them.

Relative Poverty Threshold

The relative poverty threshold defines poverty as a condition where an individual's or household's income falls below a specified fraction of the median income in a given society, typically 50% or 60% of the median equivalized disposable income. This approach, popularized by organizations like the OECD and Eurostat, measures deprivation relative to the living standards of the broader population rather than fixed absolute needs. For instance, in the European Union, the at-risk-of-poverty threshold is set at 60% of national median income, adjusted for household size using equivalence scales that weight the first adult as 1, additional adults as 0.5, and children under 14 as 0.3. Calculation involves ranking household incomes after taxes and transfers, identifying the , and applying the cutoff to determine the threshold; those below it are deemed relatively poor. Equivalization accounts for household composition to compare living standards fairly across sizes. , the Supplemental Poverty Measure incorporates some relative elements by adjusting for geographic cost variations, though the official measure remains primarily absolute; supplementary analyses often use 50% of for relative comparisons. Critics argue that relative thresholds conflate low absolute living standards with income inequality, potentially labeling individuals as despite access to modern amenities unavailable to past generations. For example, as societal incomes rise, the relative threshold increases, which can elevate reported rates even amid improvements in material welfare, such as widespread access to , , and . Empirical studies show that relative rates in high-income countries like those in the have remained stable or increased slightly since the 1980s, despite absolute declines in severe deprivation, highlighting how inequality trends drive the metric more than unmet . This approach may incentivize policy focus on redistribution over growth, as reducing inequality raises the and thus the threshold, requiring further interventions to maintain low relative rates. Proponents counter that relative measures capture and inability to participate in societal norms, such as affording average leisure or costs, which absolute metrics overlook. However, causal analyses indicate that factors like family structure changes and labor market shifts explain much of the variation in relative , rather than pure economic deprivation; for instance, single-parent households face higher relative risks due to fewer earners, independent of overall growth. In developing contexts, relative thresholds are less common, as absolute measures better align with subsistence levels, but hybrid applications, like the Bank's use of national median-based lines in some reports, blend approaches to contextualize global data. Overall, while relative thresholds provide a standardized tool for cross-country comparisons of inequality-linked deprivation, their validity hinges on assuming is inherently comparative, a contested by of decoupling between relative status and absolute hardship.

Hybrid and Alternative Approaches

Hybrid approaches to poverty measurement integrate elements of both absolute and relative thresholds to address limitations in each, such as the absolute measures' neglect of social context and relative measures' potential detachment from basic needs. These methods typically employ dual poverty lines—an absolute line for subsistence (e.g., meeting caloric requirements) and a relative line for social inclusion (e.g., 50-60% of median income)—often in a hierarchical or weighted framework where absolute deprivation takes precedence. For instance, one proposal uses hierarchical indices that first identify absolute poor and then assess relative deprivation among the non-absolute poor to capture both physiological needs and social exclusion. Economist Martin Ravallion has advocated for a global hybrid measure combining absolute income shortfalls with weakly relative adjustments, reflecting how national poverty lines vary with average incomes while anchoring to a fixed standard, such as $1.90 per day in 2011 PPP terms. This approach, detailed in a 2019 NBER working paper, aims to reconcile cross-country comparability with sensitivity to societal norms, arguing that pure relative measures inflate poverty rates in growing economies without addressing welfare improvements. Empirical applications, such as in European contexts, demonstrate that hybrid indices can reduce overestimation of poverty in high-income settings compared to relative-only metrics. Alternative approaches extend beyond income-based thresholds to incorporate non-monetary dimensions, emphasizing deprivations in capabilities or multiple welfare indicators. The , developed by in works from the onward, defines poverty not as low resources but as insufficient freedoms or "capabilities" to achieve valued functionings, such as being nourished or educated, accounting for personal conversions (e.g., varying needs due to ). This framework critiques income metrics for ignoring interpersonal variations and has influenced evaluations, though remains challenging due to the need to select relevant capabilities empirically. The (MPI), formalized by Sabina Alkire and James Foster in 2011, quantifies through weighted deprivations across (e.g., , ), (e.g., years of schooling, ), and living standards (e.g., , water, electricity, housing, assets, fuel). Applied globally by the Poverty and Human Development Initiative (OPHI) and adopted in the World Bank's Multidimensional Poverty Measure (MPM) since 2022, the MPI identifies "multidimensionally poor" households suffering deprivations in at least one-third of weighted indicators, revealing overlaps with monetary ; for example, in 2023 data across 110 countries, it captured 1.1 billion poor people, many not identified by $2.15/day lines. Subjective poverty measures, gaining traction through UNECE guidelines published in March 2025, rely on individuals' self-assessments of financial adequacy or minimum income needs for a decent life, often via survey questions on perceived lines or welfare satisfaction. These capture cultural and aspirational norms absent in objective metrics, with studies showing subjective lines aligning closely with relative thresholds (e.g., 40-60% of in European surveys) but varying by context, such as higher thresholds in welfare states. While useful for supplementing objective data, subjective approaches face challenges in comparability and potential response biases from or stigma.

Historical Development

Pre-20th Century Concepts

In , the Elizabethan Poor Law of categorized the poor into impotent (deserving relief due to incapacity), able-bodied unemployed, and , establishing an implicit threshold of self-maintenance through work or aid without fixed monetary quantification, prioritizing local assessment of inability to sustain basic existence. Gregory King's 1688 social table for estimated over half the population—common laborers, cottagers, and decayed families—as poor, with annual family incomes of £6 to £15, levels deemed insufficient for full maintenance without supplemental support, marking an early quantitative approximation of subsistence. Classical in the late 18th and early 19th centuries conceptualized thresholds through the subsistence theory of wages, defining the minimum as resources enabling worker survival, family rearing, and labor reproduction amid . , in The Wealth of Nations (1776), described this natural wage as varying by societal habits and necessities like , , and , sufficient to prevent but tending toward bare adequacy in competitive markets. , in Principles of Political Economy (1817), formalized the "iron law of wages," asserting market forces drive wages to this subsistence floor, as excess prompts and surplus depresses pay, while deficiency spurs decline—viewing as structural equilibrium below which societal labor supply falters. Thomas Malthus reinforced this in An Essay on the Principle of Population (1798, revised 1803), linking subsistence to agrarian output limits, where unchecked population exceeds , forcing wages to edges absent moral restraint. Mid-19th-century empirical studies shifted toward budget-based thresholds. Frédéric Le Play's Les Ouvriers Européens (1855) examined 36 representative family budgets across , deriving minimum expenditures for food, housing, and essentials to sustain social order and worker productivity, concluding stable families required disciplined allocation avoiding luxury, with deficits signaling poverty's moral and economic risks. Ernst Engel's 1857 analysis of Prussian household data yielded : poorer households devote higher income shares to food (up to 50-60% versus 20-30% for affluent), offering a metric to gauge subsistence by expenditure patterns rather than absolute sums, influencing later need calibrations. Late-19th-century surveys applied these to urban contexts. Charles Booth's Labour and Life of the People (1889-1891), based on police and school data, defined "primary poverty" as incomes below physical efficiency needs—roughly 10s-21s weekly per family of five for bare food (2,000-3,000 calories daily), rent, and clothing—estimating 30.7% of East End residents below this absolute line, distinct from secondary poverty of mismanagement. These pre-20th-century frameworks uniformly prioritized absolute material minima over relative shares, grounded in caloric, budgetary, or demographic imperatives, predating formalized national lines but establishing causal links between thresholds, labor supply, and stability.

20th Century Standardization Efforts

In the , efforts to standardize thresholds gained momentum in the mid-20th century amid the expansion of federal social programs. Prior to this, measurements were largely ad hoc, derived from local or academic studies without national consistency. The pivotal development occurred in 1963–1964 when Mollie Orshansky, working at the , formulated a set of thresholds based on empirical data from the U.S. Department of Agriculture's 1955 Household Food Consumption Survey, which indicated that low- families spent approximately one-third of their after-tax on food. Orshansky calculated the cost of the USDA's Economy Food Plan—a minimal nutritionally adequate diet—and multiplied it by three to estimate total family needs, adjusting for family size, age, and sex composition using equivalence scales. These thresholds were not intended as a prescriptive but as a statistical tool to identify inadequacy. Orshansky's work was published in the Social Security Bulletin in January 1965, coinciding with the launch of President Lyndon B. Johnson's initiatives. The Office of Economic Opportunity adopted these thresholds that year as the federal government's official statistical measure of poverty, providing a uniform benchmark for program eligibility and policy evaluation. This marked the first nationwide standardization in the U.S., replacing fragmented local estimates and enabling consistent tracking of poverty rates, which stood at 19% in 1964 based on the new metric. Internationally, similar standardization lagged; in the , Seebohm Rowntree's surveys (1901, 1936, 1951) influenced but did not yield a fixed national threshold, with poverty assessments relying on primary (subsistence) and secondary (cultural) needs without formal adoption until later welfare reforms. Subsequent refinements in the late addressed inflationary pressures but preserved the core Orshansky methodology. In 1968, the proposed upward adjustments to reflect rising living standards, but legislated fixed thresholds tied to the starting in 1969, effectively freezing the real value relative to 1960s consumption patterns. This approach prioritized consistency over dynamic updates, influencing global discussions on absolute thresholds through organizations like the , though widespread international adoption awaited post-1970s developments. Critics noted the thresholds' underemphasis on non-food essentials like , which had risen disproportionately, yet they endured as a benchmark due to their data-driven origins and policy utility.

Late 20th and 21st Century Evolutions

In the late , the World Bank formalized the international poverty line for at $1 per day in 1990, derived from national poverty lines in low-income countries adjusted for (PPP). This aimed to capture severe deprivation in basic consumption needs across developing nations. Periodic revisions followed to incorporate updated PPP exchange rates and consumption data; for instance, it rose to $1.08 in 2008 (using 2005 PPPs) and $1.90 in 2011 (2011 PPPs). Into the 21st century, further methodological refinements addressed limitations in earlier benchmarks. The line increased to $2.15 in 2022 (2017 PPPs), reflecting recalibrated price data from the International Comparison Program, and to $3.00 in June 2025 (2021 PPPs), which better aligns with the living standards in the world's poorest countries. These updates, grounded in empirical survey data, have enabled more accurate cross-country comparisons, though they sparked debates on whether rising lines adequately reflect in subsistence costs or risk overstating persistence amid . Nationally, the U.S. federal poverty thresholds, established in the , saw incremental changes in , including the elimination of separate farm and nonfarm distinctions and adjustments to family size weightings based on interagency recommendations. Annual updates since have relied on the for inflation adjustments, maintaining an absolute framework tied to a fixed basket of goods originating from 1960s food cost estimates multiplied by three. Recognizing methodological shortcomings—such as ignoring non-cash benefits, taxes, and geographic variations—the U.S. Census Bureau introduced the Supplemental Poverty Measure in 2011 as an experimental complement, incorporating after-tax income, government transfers, medical expenses, and regional housing costs. Debates over absolute versus relative thresholds intensified from the onward, with relative measures—typically 50-60% of —gaining traction in higher-income contexts like the for capturing beyond bare subsistence. Proponents of absolute lines argue they better track causal reductions in deprivation through growth and aid, as evidenced by global falling from 36% in 1990 to under 10% by 2015 under the $1.90 benchmark, largely driven by expansions in and . Relative approaches, while useful for inequality analysis, can mask absolute gains, as incomes rise, potentially inflating perceived rates despite improved living standards. These evolutions reflect a broader push toward hybrid metrics, balancing empirical cost-of-living data with contextual income distributions, though absolute thresholds remain central for global monitoring due to their grounding in verifiable subsistence needs.

Methodologies for Setting Thresholds

Calculation Techniques and Data Inputs

Absolute poverty thresholds are predominantly calculated using the cost-of-basic-needs (CBN) method, which determines the minimum expenditure required to achieve basic nutritional requirements and essential non-food items. This involves first specifying a food basket that provides a normative intake, typically around 2,100 kilocalories per person per day, selected based on locally consumed staples and least-cost combinations derived from dietary patterns. The cost of this basket is then computed using regional price data, often from consumer price indices or market surveys, to establish a food poverty line. A non-food component is added by observing the expenditure ratios of s just above the food line or applying a fixed multiple (e.g., 1.5 to 3 times the food line) to account for items like , , and utilities, yielding the total absolute threshold. Key data inputs for CBN calculations include detailed household-level consumption and expenditure surveys, such as nationally representative household income and expenditure surveys (HIES), which record itemized spending on and non-food over recall periods (e.g., weekly for perishables, monthly for durables). Nutritional benchmarks from sources like the provide calorie and nutrient minima, while price data from periodic market enumerations or national statistical offices ensure the basket reflects current costs. Population weights from censuses or surveys adjust for household size and composition via equivalence scales, such as the OECD-modified scale that assigns weights (1 for first adult, 0.5 for additional adults, 0.3 for children). These inputs enable of the threshold as the sum of priced essentials, fixed in welfare terms rather than varying with national averages. Relative poverty thresholds, by contrast, employ statistical techniques anchored to the distribution of income or consumption within a population, typically set at 40%, 50%, or 60% of median equivalized disposable household income after taxes and transfers. The median is computed from the full income distribution, equivalized using scales to standardize for household demographics, and the threshold applied uniformly. This method relies on probabilistic sampling from large-scale surveys to ensure representativeness, with thresholds updated periodically to reflect economic shifts but remaining proportional to societal norms. Data for relative measures primarily draw from income-focused household surveys like labor force or living standards surveys, capturing pre- and post-tax earnings, benefits, and in-kind transfers over annual or monthly periods. Sources such as validate aggregates, while microdata processing addresses underreporting (e.g., via imputation for top incomes) and equivalence adjustments. Unlike absolute methods, relative calculations emphasize distributional percentiles over fixed baskets, using statistical software to derive medians from weighted survey samples that mirror demographics from es. Both approaches incorporate sensitivity analyses for data quality, such as recall bias in self-reported expenditures or sampling errors estimated via .

Purchasing Power Parity and Inflation Adjustments

Purchasing power parity (PPP) exchange rates adjust for differences in price levels across countries, enabling the conversion of national currencies into a common unit—international dollars—that reflects comparable real purchasing power for a standard basket of goods and services. In poverty measurement, PPP is crucial for establishing international benchmarks, as nominal exchange rates often fail to capture variations in living costs; for instance, the World Bank's International Comparison Program (ICP) compiles price data from over 190 economies every few years to compute these rates, with the 2021 cycle informing recent revisions. The World Bank's global poverty line, set as the median of national lines from low-income countries expressed in PPP terms, exemplifies this application; following the 2021 ICP update, it rose to $3.00 per person per day in 2021 PPP dollars as of June 2025, superseding the prior $2.15 line based on 2017 PPPs, to better align with contemporary price structures and national thresholds. This adjustment ensures the threshold represents equivalent welfare levels globally, though infrequent ICP rounds—typically every three to six years—necessitate interpolations for interim years, potentially introducing estimation errors in trend analyses. Domestically, adjustments maintain the real value of poverty thresholds by indexing them to price indices that track changes in the cost of essential goods; , official thresholds, originally derived as the 1963 minimum food budget cost, are updated annually using the for All Urban Consumers (CPI-U), which rose 4.1% from 2022 to 2023, yielding proportional increases in thresholds. Similar methodologies apply elsewhere, with national consumer price indices ensuring thresholds do not erode due to ; however, reliance on fixed baskets in these indices may overlook shifts in consumption patterns, such as toward non-food essentials, prompting critiques that chained or expenditure-weighted indices like those in the Supplemental Poverty Measure offer superior responsiveness. When PPP revisions coincide with inflation updates, historical poverty estimates are recalibrated, as seen in the World Bank's 2025 shift, which retroactively altered global headcount ratios by incorporating updated price parities and national lines from over 160 countries. This process underscores PPP's role in causal realism for cross-temporal and spatial comparisons, yet it highlights methodological tensions: PPP data's sparsity in low-income contexts can bias aggregates toward better-surveyed economies, while inflation adjustments assume stable relative prices, potentially understating poverty persistence amid structural economic changes.

Criticisms of Methodological Assumptions

One primary criticism concerns the arbitrary composition of the basket used to define minimal consumption requirements. In absolute measures, such as the World Bank's international poverty line, the basket typically emphasizes caloric sufficiency and essential non-food items like and shelter, but critics argue this underrepresents modern necessities including healthcare, , and transportation, which constitute larger shares of low-income s today. For instance, the U.S. federal poverty guidelines, derived from Mollie Orshansky's 1963 methodology, scaled a minimum budget by a factor of three based on mid-20th-century spending patterns, yet now averages less than 13% of poor households' expenditures, while and medical costs have surged, leading to systematic underestimation of thresholds. Equivalence scales, which adjust thresholds for household size and composition, rely on contested assumptions about and needs by age or . Standard scales, such as the of household size, presume uniform per-capita reductions in costs as family size grows, but empirical studies reveal nonlinear variations; for example, children require disproportionately higher per-person spending on and compared to adults, inflating effective poverty risks for large or single-parent families. These assumptions often draw from outdated analyses, ignoring cultural differences in intrahousehold allocations and failing to incorporate childcare costs, which can exceed 20% of income for working-poor parents in high-cost areas. Purchasing power parity (PPP) adjustments, intended to equalize thresholds across countries, assume stable exchange rates and comparable price structures for the needs basket, yet methodological flaws arise from incomplete data on non-tradable goods like and services, which vary widely by and informality. In developing economies, PPP calculations frequently undervalue rural subsistence economies where or home production substitutes cash expenditures, resulting in rates that appear lower than actual deprivation levels; a 2019 analysis highlighted how this overlooks regional cost disparities, with urban thresholds needing 50-100% uplifts in places like . Inflation indexing via consumer price indices (CPIs) compounds issues by using general population baskets rather than poor-specific ones, where price sensitivities differ—e.g., food and energy weight more heavily for the destitute, yet CPIs overweight durables, biasing thresholds upward over time. Methodological assumptions often neglect dynamic behavioral responses and non-monetary dimensions, treating poverty as a static income shortfall rather than a influenced by public provisioning or time constraints. Absolute thresholds ignore how safety nets like food subsidies alter effective needs, potentially double-counting deprivations, while relative measures assume societal medians inherently reflect adequacy without causal evidence linking inequality to baseline welfare. Critics contend this overlooks "time poverty," where unpaid labor—disproportionately borne by women—reduces market participation, with studies estimating that incorporating equivalents raises measured by 10-20% in low-income settings. Such oversights stem from data limitations in surveys, which underreport informal s and assets, perpetuating flawed incidence estimates.

International Standards

World Bank International Poverty Lines

The World Bank defines international poverty lines (IPLs) as absolute monetary thresholds, expressed in (PPP) terms, to enable cross-country comparisons of prevalence. These lines facilitate global aggregation of poverty data, primarily for low-income economies, by converting national consumption or income surveys into a common international currency unit that adjusts for price level differences. The core IPL targets , representing the minimum resources needed for basic survival in the poorest contexts, and is applied uniformly worldwide for monitoring (ending ). As of June 5, 2025, the IPL for stands at $3.00 per person per day in 2021 PPP terms, reflecting an update from the prior $2.15 line (in 2017 PPP terms) established in September 2022. This adjustment incorporates revised PPP exchange rates from the International Comparison Program and aligns the threshold with the national poverty line among the world's 37 poorest , rounded for practicality. The derives the IPL by aggregating and converting national lines—typically set at levels affording minimal , , and non-food essentials—from low-income , ensuring the global measure captures conditions in economies where the majority of extreme poor reside. Supplementary lines exist for broader monitoring: $3.65 per day for lower-middle-income (45th of their national lines) and $6.85 per day for upper-middle-income (reflecting higher national thresholds). Historical evolutions trace back to the $1.00 line (1990 PPP) in the , raised to $1.08 (1993 PPP) in 2000, $1.25 (2005 PPP) in 2008, and $1.90 (2011 PPP) in 2015, each incorporating updated PPP and expanded country coverage to better reflect deprivation in low-income settings. Updates periodically recalibrate for , methodological refinements in survey , and shifts in global structures, though critics note potential underestimation of non-monetary deprivations like access to clean water or healthcare, which the IPL does not directly incorporate. The Bank's Poverty and Inequality Platform (PIP) disseminates these estimates, drawing from over 170 countries' surveys, with nowcasts projecting global at 9.9% (approximately 780 million people) under the $3.00 line for 2025, concentrated in .
Year of UpdatePoverty Line (PPP Basis)Key Changes
2008$1.25 (2005 PPP)Expanded to median of more low-income countries
2015$1.90 (2011 PPP)Incorporated 2011 ICP revisions
2022$2.15 (2017 PPP)Adjusted for 2017 PPP and survey improvements
2025$3.00 (2021 PPP)Updated to 2021 PPP; median of 37 poorest nations
These lines underpin World Bank reports, such as the Poverty, Prosperity, and Planet series, which emphasize that while absolute has declined—from 36% of the global population in 1990 to under 10% today—progress stalls amid shocks like the and conflicts, with the updated threshold revealing slower reductions in measured poverty due to its higher bar. Empirical validation relies on consumption-based surveys, prioritizing equivalence (around 2,100 calories daily) plus minimal non-food spending, though equivalence scales for size introduce assumptions debated for accuracy in diverse cultural contexts.

United Nations and Multidimensional Measures

The (UNDP), in collaboration with the Oxford Poverty and Human Development Initiative (OPHI), publishes the annual (MPI) to measure acute poverty beyond income alone. Introduced in the 2010 UNDP , the MPI employs the Alkire-Foster method, a counting approach that identifies individuals as poor if they experience deprivations across a significant portion of weighted indicators, rather than relying solely on monetary thresholds. This framework assesses poverty's incidence (headcount ratio, or proportion of people poor) and intensity (average deprivations among the poor), providing a composite MPI value as their product. The global MPI evaluates deprivations in three dimensions—, and living standards—using 10 indicators drawn from surveys such as Demographic and Health Surveys and Multiple Indicator Cluster Surveys. Each dimension receives equal weight (one-third), with indicators weighted equally within dimensions except for living standards, where some are double-weighted to reflect their foundational role. A is deemed multidimensionally poor if deprived in at least one-third (33.3%) of the total weighted indicators; individuals within poor households are counted as poor.
DimensionIndicatorsDeprivation DefinitionWeight
HealthNutritionAny adult or child under 70% of median BMI/height-for-age standards1/6
Child and adolescent mortalityDeath of a child or adolescent in the household in the last five years1/6
EducationYears of schoolingNo household member aged 10+ completed six years of schooling1/6
School attendanceAny school-aged child not attending school up to the age at which they should complete eight years1/6
Living StandardsCooking fuelUses dung, wood, charcoal, or other biomass for cooking1/18
SanitationImproved sanitation facilities not shared with non-household members or no facilities1/18
Drinking waterUnimproved or more than 30-minute walk round trip for improved sources1/18
ElectricityNo electricity1/18
HousingAt least one of: roof/floor/wall made of natural/destroyed materials1/18
AssetsOwns fewer than one of: radio, TV, phone, bike, motorized vehicle, or refrigerator (no internet substitute)1/18
This structure, validated through peer-reviewed applications, complements monetary poverty lines (e.g., World Bank's $2.15/day extreme threshold) by capturing non-income hardships like inadequate or schooling, which surveys show affect populations overlooked by income metrics alone. For instance, while monetary and multidimensional poverty incidences correlate internationally, discrepancies arise in contexts where improves incomes but leaves service access stagnant, as evidenced in analyses of over 100 developing countries. The 2025 Global MPI, covering 6.3 billion people in 109 countries using data up to 2023, reports 1.1 billion (18.3%) as multidimensionally , with higher intensities in rural areas and among children. Subnational disparities reveal pockets of persisting despite national averages, informing targeted policies; for example, 72% of the poor live in Middle Africa or . National MPIs, adapted by over 40 countries including (2010) and (2012), allow customization of indicators to local contexts while retaining the core Alkire-Foster . Critics note survey-based data may undercount transient deprivations or urban informal sectors, yet the MPI's transparency in weighting and thresholds enables rigorous comparisons and policy evaluation.

Recent Updates and Revisions

In June 2025, the World Bank revised its international line to $3.00 per person per day in 2021 (PPP) terms, superseding the prior $2.15 threshold anchored to 2017 PPPs. This adjustment incorporated updated PPP exchange rates from the 2021 International Comparison Program and revised national poverty lines from over 160 countries, reflecting shifts in consumption patterns and relative prices rather than a deterioration in global welfare. Consequently, retrospective estimates for 2024 indicated 817 million people in under the new line, an increase of 125 million compared to prior figures, though nowcasted projections showed a decline from 10.5% of the global population in 2022 to 9.9% in 2025. The revision also updated lines for higher-income brackets: $4.20 for lower-middle-income countries and $8.30 for upper-middle-income countries, calibrated against national thresholds to better capture context-specific deprivation levels. These changes addressed limitations in earlier benchmarks, such as undercounting in regions with rising food and non-food costs, while maintaining an absolute consumption-based approach focused on like and shelter. Parallel updates in multidimensional poverty measurement included the World Bank's June 2025 expansion of its to 120 economies, integrating monetary poverty with deprivations in education and basic infrastructure access, up from 110 countries previously. The and Oxford Poverty and Human Development Initiative released the Global 2025 in October, retaining the established framework of 10 indicators across , and living standards but introducing overlays mapping poverty against climate hazards, revealing that 651 million multidimensionally poor individuals face at least two such risks. This edition estimated 1.1 billion people (18.3% of the global population) as multidimensionally poor, emphasizing data-driven refinements over threshold alterations.

National Poverty Thresholds

United States Federal Poverty Guidelines

While this article primarily discusses U.S. Census Bureau poverty thresholds as statistical measures, the Federal Poverty Guidelines (FPL), distinct from these thresholds and used for determining eligibility in federal programs, are issued annually by the Department of Health and Human Services (HHS), typically updated in January. These guidelines serve as simplified administrative benchmarks derived from the Bureau's more detailed poverty thresholds. These guidelines, distinct from the Census Bureau's thresholds which function as a statistical measure of poverty, determine financial eligibility for various federal assistance programs, including , the (CHIP), and the (SNAP). Low-income status for eligibility is frequently defined beyond 100% of the FPL, with thresholds at 150% FPL for some programs and 200% FPL for broader assistance such as housing aid; under the 2026 guidelines, 150% FPL equates to $23,940 annually ($1,995 monthly) for a single person and $49,500 annually ($4,125 monthly) for a four-person household, while 200% FPL reaches $31,920 ($2,660) and $66,000 ($5,500), respectively. These extended measures encompass the working poor and affect approximately 30-40% of the U.S. population. Unlike the thresholds, which incorporate variations for family composition and are used in official poverty statistics, the guidelines apply uniform adjustments for household size across most states, with separate figures for and to account for elevated living costs. The methodology traces to economist Mollie Orshansky's 1963-1964 calculations at the , which established initial thresholds by multiplying the cost of the U.S. Department of Agriculture's Economy Food Plan—a minimal nutritionally adequate diet—by three, reflecting 1955 household expenditure surveys indicating that families allocated approximately one-third of after-tax income to food. Orshansky's approach differentiated thresholds by family size, age of children, farm versus nonfarm residence, and gender of the head, but the HHS guidelines streamline these into a base amount for one person plus fixed increments for additional members, updated yearly via the for All Urban Consumers (CPI-U) to reflect . This absolute measure prioritizes a fixed basket of over relative income comparisons, aiming to capture subsistence-level deprivation, though it has remained largely unchanged in core assumptions since inception. The 2026 Federal Poverty Guidelines, for the 48 contiguous states and the District of Columbia set the threshold at $15,960 annually for a single- , $21,640 for a household of two, increasing by $5,680 per additional ; for a of four, this yields $33,000. Alaska's figures are 25% higher ($19,950 for one ), and Hawaii's are approximately 15% higher ($18,360 for one ), reflecting regional cost disparities. Beyond eight persons, increments continue at the same rate. These values exclude non-cash benefits, taxes, and in-kind transfers in eligibility determinations, focusing solely on cash income comparisons.
Persons in Family/Household48 Contiguous States and D.C.
1$15,960$19,950$18,360
2$21,640$27,050$24,890
3$27,320$34,150$31,420
4$33,000$41,250$37,950
5$38,680$48,350$44,480
6$44,360$55,450$51,010
7$50,040$62,550$57,540
8$55,720$69,650$64,070
For families/unrelated individuals with more than 8 persons, add $5,680 for each additional person in the 48 contiguous states, $7,100 in , and $6,530 in . Critics argue the guidelines understate modern living costs by anchoring to outdated food-centric assumptions, as contemporary households devote less than one-third of income to and face higher expenditures on , healthcare, and transportation not factored into the original . The lack of routine geographic adjustments beyond and ignores urban-rural and regional variations, potentially misclassifying eligibility in high-cost areas like New York or . Empirical analyses indicate the measure fails to incorporate non-monetary resources such as or stamps, which can elevate effective living standards above the line, while also overlooking out-of-pocket medical expenses that push households below it. Proponents counter that its absolute nature better tracks material hardship over time compared to relative metrics, which may conflate inequality with deprivation, and note that supplemental measures like the Supplemental Poverty Measure (SPM) address some gaps without supplanting the guidelines' administrative role.

European Union and OECD Approaches

The European Union primarily utilizes a relative income-based poverty threshold within its At-Risk-of-Poverty (AROP) indicator, defined as 60% of the national median equivalised disposable income after social transfers. Equivalised disposable income adjusts total household income for size and composition, typically applying a modified OECD equivalence scale that assigns a weight of 1 to the first adult, 0.5 to additional adults or those aged 14 and over, and 0.3 to children under 14. This threshold is calculated annually using data from the EU Statistics on Income and Living Conditions (EU-SILC) survey, which collects harmonized information on income, living conditions, and deprivation across member states, with reference year incomes typically assessed for the prior calendar year. The AROP rate represents the share of the population below this threshold and forms one component of the broader At Risk of Poverty or (AROPE) metric, which also incorporates severe material deprivation—defined as inability to afford at least four of nine essential items, such as heating a or taking a week-long —and very low work intensity, measured as households with dependent children where working-age adults work less than 20% of potential time. In 2023, the EU AROPE rate stood at 21.0%, affecting approximately 93.3 million people, with thresholds varying significantly by country due to differences in median —for instance, higher in wealthier northern states like (around €20,000 annually) compared to southern states like (around €4,000). This relative approach, anchored to national medians, aims to capture inadequacy within each country's but has been noted for potential insensitivity to absolute living standards, as rising overall incomes can elevate the threshold without addressing fixed costs like . The Organisation for Economic Co-operation and Development () adopts a similar relative framework, setting the poverty line at 50% of median equivalised household disposable income, adjusted for household size using the of the number of members. This measure focuses on monetary and draws from national household surveys harmonized under guidelines, emphasizing post-tax-and-transfer incomes to reflect policy impacts. Unlike the EU's 60% benchmark, the OECD's 50% line yields higher reported poverty rates in comparative analyses; for example, across OECD countries in 2022, child poverty rates under this definition averaged 17.6% for those under 18. The approach prioritizes cross-country comparability while acknowledging national variations, though it excludes non-monetary dimensions unless supplemented by multidimensional indicators in specific reports. Both EU and OECD methods rely on self-reported survey data, which may undercount informal incomes or overstate due to recall biases, prompting periodic methodological refinements such as imputations for non-response.

Examples from Developing Economies

In developing economies, national poverty thresholds are often calculated using a cost-of-basic-needs , which estimates the minimum expenditure required to meet nutritional requirements—typically 2,100–2,400 calories per day—augmented by allowances for non-food essentials like and , with adjustments for regional price variations and urban-rural divides. These thresholds diverge from international standards, such as the Bank's updated extreme poverty line of $3.00 per person per day (2021 PPP), by incorporating local consumption baskets that reflect lower absolute costs in many contexts, though they may understate deprivations when compared to higher benchmarks for middle-income countries. India has transitioned from monetary-based thresholds to the National Multidimensional Poverty Index (MPI), jointly developed by and the , which evaluates deprivations across health, education, and living standards using 12 indicators weighted by household survey data. The 2023 MPI baseline, drawn from the 2019–21 , identifies 14.96% of the population as multidimensionally poor, a decline from 24.85% in 2015–16, emphasizing non-monetary dimensions over a fixed income line; the last formal monetary estimates, from the 2011 Tendulkar panel using 2009–10 prices, placed rural thresholds at approximately ₹816 monthly and urban at ₹1,000, but these remain unadjusted officially amid debates on data gaps in recent consumption surveys. China's national poverty thresholds historically differentiated between rural and urban areas, with the rural standard set at 2,300 yuan per capita annually in 2010 constant prices—equivalent to roughly $400 USD or $1.10 daily—focusing on below this level for targeted interventions that culminated in the government's declaration of absolute eradication, reducing rural poor from 98 million in 2012 to near zero. Urban lines were calibrated higher, often at provincial levels around 3,000–4,000 yuan yearly, but post- policy has pivoted to relative metrics tied to multiples, reflecting a causal emphasis on sustained growth drivers like and relocation programs over static absolute lines. In , the national poverty threshold is defined by the Brazilian Institute of and Statistics (IBGE) as per monthly household income below R$637 (2022 values), equivalent to about half the at the time and capturing 31.6% of the , while extreme is set at R$218 monthly or roughly one-quarter , guiding programs like that condition transfers on schooling and compliance. This relative-absolute hybrid, updated via continuous household surveys, yielded lower rates than international upper-middle-income lines ($8.30 daily), with falling from 36.7% in 2021 amid economic recovery. Nigeria's national poverty line, established via a 2011 rebasing to reflect a basket yielding 3,306 calories daily plus non-food spending, equates to approximately 321.5 naira daily (2018 prices), classifying 40.1% of the as poor based on the 2018/19 Living Standards Survey—higher incidence than the 30.9% under the international $2.15 (2017 PPP) extreme line, attributable to elevated local non-food costs and urban inflation pressures despite oil-dependent fiscal constraints.

Global Absolute Poverty Decline

Global , measured against the World Bank's international poverty line of $1.90 per day in 2011 (PPP), declined from 38 percent of the world's in 1990—approximately 2 billion people—to 8.6 percent by 2018, lifting over 1.2 billion individuals out of this condition. Updated to the $2.15 line in 2017 PPP terms, the rate stood at 8.5 percent in 2022, affecting about 700 million people, with projections indicating a further drop to 9.9 percent by 2025 despite setbacks from the . This trajectory reflects a historic reduction, with the absolute number of people in falling from 2.3 billion in 1990 to around 831 million by 2025. The primary causal factor in this decline has been sustained driven by market-oriented reforms in high-population developing economies, particularly and , which together accounted for the majority of global since 1981. In , Deng Xiaoping's 1978 economic reforms—including agricultural de-collectivization, household responsibility systems, and integration into global trade—spurred annual GDP growth exceeding 9 percent through the 2000s, reducing the national poverty rate from 88 percent in 1981 to effectively zero by 2020 under its own absolute threshold, contributing to the eradication of for nearly 800 million citizens. India's 1991 liberalization measures, which dismantled the License Raj, reduced trade barriers, and encouraged private enterprise, similarly halved from 45 percent in 1993 to around 21 percent by 2011, with growth averaging 6-7 percent annually fostering job creation in and services. These reforms prioritized broad-based gains over redistribution, enabling real wage increases and consumption improvements that directly elevated living standards above subsistence levels. While progress accelerated post-2000 due to and technological diffusion, recent data show a slowdown, with rates stagnating around 8-9 percent from 2015 to 2022 amid slower growth in key regions and exogenous shocks like the 2020 pandemic, which temporarily reversed gains by an estimated 70-95 million people. The World Bank's June update to a $3.00 per day line (2021 PPP) incorporates and revisions, raising measured to about 23 percent globally but affirming the long-term downward trend when benchmarked consistently over time. Sub-Saharan Africa's share of global extreme poor has risen to over 60 percent, underscoring uneven regional distribution despite aggregate success. Empirical analyses attribute the decline less to foreign aid or welfare expansion and more to domestic policy shifts enabling and trade, challenging narratives emphasizing state intervention over market incentives.

National Variations and Recent Data

National poverty thresholds vary substantially across countries, reflecting differences in measurement approaches—absolute lines based on estimated costs in places like the , versus relative lines pegged to a percentage of (typically 50% or 60%) in most and EU nations—which complicates direct comparisons. Absolute thresholds in lower-income countries often calibrate to local consumption baskets for essentials like and , while relative measures in high-income settings capture inequality but may inflate rates amid rising living standards. These methodological divergences, combined with adjustments for (PPP) and inflation, yield national poverty lines that differ widely even after cost-of-living normalization; for example, a basket might equate to under $2 daily in some African nations but exceed $20 in . Recent data underscore these variations in application. In the United States, the official poverty measure (OPM)—an derived from food costs multiplied by three for non-food expenses—registered a national rate of 11.1% in 2023, affecting 36.8 million individuals, with supplemental measures incorporating taxes and benefits showing slightly lower figures around 7-8%. In contrast, relative (50% of median equivalized income) stood at 18% for the US in recent assessments, the highest among advanced economies, compared to an average of 11.4% in 2021, where rates ranged from under 8% in like and to over 20% in . Within the , the at-risk-of-poverty rate—defined as disposable income below 60% of the national median—edged down to 16.2% in 2023 from prior years, with flash estimates projecting a marginal decline to 16.1% for 2024 amid stabilizing incomes post-inflation; country-level disparities persist, with rates exceeding 20% in and versus under 10% in Czechia. In developing economies, national thresholds often yield lower reported rates than international benchmarks; Indonesia's 2024 national line implied a 9.4% rate, far below World Bank estimates using a $6.85 PPP-adjusted threshold, highlighting how local calibrations emphasizing affordability of rice and staples diverge from global standards. Similarly, India's national fell to affect about 11% of the by 2023 per surveys, driven by access to sanitation and electricity, though absolute income-based estimates remain debated amid data inconsistencies.
Country/RegionThreshold TypePoverty RateYearNotes
Absolute (OPM, ~$15,000 for individual)11.1%2023Covers 36.8 million; excludes in-kind benefits in base measure.
AverageRelative (50% )11.4%2021Highest in US (18%); lowest in , Czechia (~6%).
Relative (60% )16.2%2023Projected 16.1% for 2024; varies from 20%+ in .
IndonesiaNational absolute (local basket)9.4%2024Differs from WB's higher PPP-based estimate due to threshold calibration.
These figures reveal not only definitional impacts—relative measures rising with inequality while absolute ones stabilize post-economic shocks—but also empirical trends like stalled declines in high-income relative amid post-pandemic inflation, contrasting with faster absolute reductions in emerging markets via targeted interventions.

Evidence on Threshold Accuracy

Empirical studies indicate that official poverty thresholds often fail to precisely identify households experiencing deprivation, with significant non-overlap between income-based and indicators of hardship such as inability to afford basic necessities. For instance, in , only about 50% of individuals below low-income thresholds exhibit deprivation, while a substantial portion of those above thresholds still face such conditions, suggesting thresholds capture only partial aspects of lived . Similarly, among U.S. children, 70% identified as poor by income measures do not align with deprivation metrics, highlighting measurement discrepancies that can misdirect policy targeting. Cross-national further reveals weak correlations between common measurement approaches, undermining the reliability of any single threshold for . A study of 16,150 households in , , and found pairwise correlations between expenditure-based, asset-index, and proxy-wealth methods ranging from near zero to 0.5, with households' rankings differing by an entire on average ( shifts of 13-29% in rural areas). Even within the bottom quintile, only isolated cases were consistently classified as severely poor across methods, indicating thresholds' sensitivity to methodological choices rather than inherent accuracy. Validation against outcomes shows no abrupt discontinuity at thresholds, implying arbitrariness in their delineative power. Regression discontinuity analyses, such as those examining survival rates, reveal gradual improvements in and above poverty lines rather than sharp breaks, with benefits most pronounced from mid-adulthood to age 80 but varying by threshold type (e.g., absolute vs. relative). gains sufficient to cross thresholds modestly enhance , yet effect sizes remain small, and geographic adjustments to thresholds better align with reduced deprivation across well-being domains like and . Global absolute thresholds, such as the World Bank's $1.90 per day line (updated to $2.15 in 2022), introduce substantial uncertainty due to derivation methods reliant on data prone to errors in conversions, potentially biasing estimates by 10-20% or more in low-income contexts. studies suggest conventional lines underestimate minimal quality-of-life thresholds, with empirical ranges around PPP $2,000 monthly (±200) better reflecting perceived adequacy, as material metrics alone overlook contextual factors like inequality and non-monetary deprivations.

Criticisms and Controversies

Definitional and Measurement Flaws

Poverty thresholds are often defined as the minimum level required to meet , yet this conception embeds definitional flaws by assuming a static, universal basket of essentials that fails to evolve with societal changes in , demographics, and economic structure. For instance, thresholds typically prioritize sufficiency without incorporating non-monetary deprivations such as access to , , or healthcare, leading to an incomplete portrayal of hardship that overlooks causal factors like family structure or geographic isolation. Absolute thresholds, while intended to capture material deprivation, arbitrarily fix needs at historical benchmarks, ignoring how rising living standards redefine necessities—such as reliable or basic digital connectivity—which were absent in original formulations. In the United States, the federal poverty guidelines stem from a 1963 methodology developed by Mollie Orshansky, which set thresholds at three times the cost of a USDA-defined minimum food diet for a family, based on mid-1950s data showing food expenses as one-third of after-tax income. This multiplier has remained unchanged despite food now comprising only about 11-13% of household budgets as of 2021, while expenditures on housing (over 30%), healthcare, and childcare have surged, distorting the measure's relevance to current cost structures. The approach also neglects regional cost-of-living variations; a uniform national threshold ignores how $30,000 affords basics in rural Mississippi but falls short in urban California, where housing costs can exceed 50% of income. Equivalence scales, which adjust thresholds for household size (e.g., adding 20-40% for each additional member beyond the first two adults), rely on elasticities derived from 1960s consumption data and often understate needs for larger families or single parents facing childcare costs. Internationally, the World Bank's line—updated to $2.15 per day in 2022 (PPP) terms—averages national lines from the 25-40 poorest countries, introducing since it extrapolates from low-income contexts irrelevant to middle-income nations where local costs for non-food essentials like differ markedly. This PPP adjustment, while mitigating currency distortions, still embeds measurement flaws from survey data, including underreporting of informal (which constitute 30-60% of in developing economies) and reliance on self-reported consumption that omits in-kind support or asset liquidation. Thresholds further falter by treating as unidimensional, disregarding deprivations in multidimensional indices (e.g., , schooling) that correlate more strongly with long-term outcomes than alone, as evidenced by Alkire-Foster metrics showing higher poverty headcounts when non-income factors are included. These flaws propagate errors in aggregation: official measures exhibit upward in unidimensional estimates due to inaccuracies, such as non-response in surveys or exclusion of remittances, which can comprise 10-20% of GDP in recipient . In high-income settings, thresholds exclude government transfers and tax credits in primary calculations, understating effective resources, while in low-income areas, they overstate severity by not accounting for behavioral adaptations like subsistence farming. Reforms like the U.S. Supplemental Measure (introduced 2011) attempt corrections by including benefits and expenses, yet even these retain the core definitional rigidity, highlighting persistent challenges in deriving causally grounded, empirically validated lines.

Incentive Distortions from Thresholds

Poverty thresholds often serve as eligibility cutoffs for means-tested welfare programs, creating benefits cliffs where a modest income increase triggers the abrupt loss of subsidies, resulting in net financial losses for recipients. This phenomenon arises because benefits like food assistance, housing vouchers, and health coverage phase out entirely upon crossing the threshold, rather than tapering gradually, leading to effective marginal tax rates (EMTRs) that can exceed 100% in the vicinity of the poverty line. For instance, a family earning an additional $1,000 might forfeit $1,500 or more in benefits, discouraging work effort or career advancement. In the United States, households combining multiple programs—such as SNAP (food stamps), Medicaid, and Section 8 housing—frequently encounter EMTRs ranging from 70% to over 100% near federal poverty guidelines. A 2013 analysis found that some low-income families face implicit tax rates above 80%, where $100 of additional earnings yields less than $20 in disposable income after benefit reductions and taxes. Government simulations confirm this for "program bundles," with cliffs persisting despite expansions like the Affordable Care Act, as eligibility for non-health benefits remains tied to strict income limits. These distortions foster poverty traps, where individuals rationally avoid income gains to preserve benefits, reducing labor supply and upward mobility. Empirical models indicate that high EMTRs elevate the non- rate among eligible populations by altering incentives for part-time versus full-time work or spousal . While some analyses dispute the prevalence of behavioral responses, arguing cliffs affect few households long-term, first-principles holds that such penalties demonstrably suppress participation, as evidenced by stagnant among means-tested recipients despite economic recoveries. Similar issues manifest internationally, where threshold-based aid in programs like the EU's social assistance or conditional transfers in developing nations creates analogous disincentives, though data on EMTRs is sparser outside the U.S. Reforms like gradual phaseouts or aim to mitigate cliffs, but thresholds inherently amplify distortions unless decoupled from eligibility.

Ideological Debates on Absolute vs. Relative

Absolute poverty thresholds define deprivation based on fixed minimum requirements for such as , , and , adjusted only for , allowing measurement of material progress independent of societal wealth distribution. In contrast, relative thresholds, often set at 50% or 60% of , emphasize inequality by classifying individuals as poor if they fall below a proportion of average living standards, even if their absolute conditions improve. These approaches fuel ideological divides, with proponents of absolute measures arguing they align with first-principles definitions of as inability to meet needs, while relative advocates prioritize social cohesion and perceived deprivation. Conservative and market-oriented thinkers favor absolute metrics, contending they provide an objective gauge of human suffering and demonstrate the efficacy of economic growth in eradication efforts; for instance, global extreme absolute poverty fell from 36% in 1990 to under 10% by 2015, reflecting billions lifted from destitution through trade and development, unmasked by relative measures that might register increases amid rising medians. Such views, echoed in analyses critiquing relative lines for conflating poverty with inequality, hold that policy should target verifiable needs rather than perpetual redistribution, as relative poverty can persist or worsen in prosperous societies despite universal access to basics. Critics from this perspective note that academic and media institutions, often exhibiting left-leaning biases, underemphasize absolute declines to sustain narratives of systemic failure. Progressive and egalitarian perspectives advance relative measures as capturing the multifaceted harms of inequality, including , health disparities, and reduced mobility, which absolute thresholds overlook by ignoring contextual norms; studies indicate correlates with worse outcomes like lower even above subsistence levels. Advocates argue that in advanced economies, manifests as inability to participate in societal norms—such as affording or —rather than mere , justifying thresholds that adjust with living standards to address power imbalances from wealth gaps. However, empirical scrutiny reveals relative metrics can misleadingly signal rising during broad-based gains, as seen in developing nations where absolute plummeted yet relative rates climbed due to uneven growth. The debate underscores tensions between causal realism—prioritizing interventions that elevate absolute floors via —and concerns over relative positioning, with suggesting absolute approaches better track long-term welfare gains, as relative ones risk incentivizing stasis over . Hybrid proposals, combining both, have emerged to reconcile these, though purists on either side maintain philosophical inconsistencies in blending objective need with subjective comparison. Ultimately, source selection in discourse often reflects priors, with right-leaning outlets highlighting absolute successes to affirm growth policies, while left-leaning ones amplify relative persistence to advocate equity-focused reforms.

Policy and Societal Implications

Influence on Welfare and Redistribution

Poverty thresholds serve as benchmarks for eligibility in means-tested welfare programs, determining access to benefits such as food assistance, housing subsidies, and health coverage in systems like the U.S. Federal Level (FPL), where programs phase out or terminate at multiples of the threshold (e.g., SNAP eligibility up to 130% of FPL). This targeting mechanism facilitates redistribution by concentrating transfers on households below the line, with U.S. means-tested spending reaching $688 billion in 2018, representing 16% of federal outlays aimed at low-income groups. However, abrupt phase-outs create "benefit cliffs," where incremental income gains trigger disproportionate benefit losses, yielding effective marginal tax rates exceeding 100% in some scenarios and potentially reducing net household resources. Empirical analyses indicate these cliffs distort labor incentives, particularly for near-poor families exiting , as simulations reveal peak marginal rates during transitions from dependence to self-sufficiency. A 2014 study across U.S. states found that high benefits combined with cliffs deterred work in 34 jurisdictions, trapping recipients in low-earning patterns to preserve eligibility. Similarly, recent modeling in the District of Columbia highlighted how cliffs undermine mobility, with low-wage workers facing net losses from raises due to lost subsidies, though phase-in reforms (e.g., tapers) have shown mixed success in mitigating disincentives. These effects extend to family decisions, including reduced rates or hours worked, as benefits often penalize combined household incomes. In terms of redistribution, thresholds enable precise allocation but foster dependency by eroding work incentives, with evidence suggesting means-tested transfers elevate consumption among recipients while slowing poverty escape via investment. Official poverty metrics incorporating benefits show reductions—e.g., U.S. rates dropping from 13.3% to 3.5% post-inflation adjustments amid expansions—but critics argue this masks underlying behavioral traps, as unadjusted measures reveal persistent material shortfalls without transfers. Cross-national comparisons further indicate that while welfare lowers reported , high marginal rates from threshold-linked benefits correlate with lower employment among low-skill groups, challenging claims of net efficiency in egalitarian redistribution. Reforms like broader eligibility or universal alternatives aim to flatten cliffs, though empirical outcomes vary by program design.

Behavioral and Economic Responses

Poverty thresholds, particularly when employed to determine eligibility for means-tested benefits, generate behavioral distortions by altering incentives for work and reporting. Individuals near the threshold may strategically limit earnings or hours worked to avoid disqualification from programs such as SNAP or , where benefits phase out abruptly. This phenomenon, known as the benefits cliff, results in effective marginal tax rates (EMTRs) often exceeding 100%, where additional earnings lead to losses due to forfeited aid. Empirical studies document these responses through income bunching just below eligibility cutoffs and reduced labor participation. For instance, analysis of the Affordable Care Act's subsidy thresholds revealed significant bunching of reported incomes below the eligibility notch, indicating deliberate earnings suppression to retain subsidies. Similarly, welfare experiments like Connecticut's 1996 Jobs First reform, which tightened work requirements and adjusted benefit structures, increased female labor supply by 5-10% in the short term, suggesting prior thresholds had suppressed employment via generous non-work incentives. Comprehensive reviews confirm welfare programs' substantial effects on labor market transitions, with recipients showing lower transition rates to employment when facing high EMTRs. These individual responses aggregate into broader economic effects, including diminished labor force participation among low-income groups and heightened fiscal costs from prolonged dependency. Near-poor households, often at 100-250% of the federal level, experience the sharpest disincentives, contributing to "disincentive deserts"—income ranges where net gains from work are minimal or negative, impeding upward mobility. Evidence from state-level analyses indicates cliffs can reduce incentives equivalent to 10% of quarterly earnings in affected programs. Policy adjustments, such as gradual benefit phase-outs or expanded categorical eligibility, have mitigated some distortions; for example, broadening SNAP eligibility reduced cliffs in certain states but introduced new work disincentives on intensive margins like hours worked. Internationally, absolute thresholds in aid programs similarly prompt underreporting or subsistence-level responses to maintain eligibility, though data is sparser and effects vary by program design. Overall, while thresholds aim to target aid efficiently, their rigidity fosters causal chains of reduced and entrenched for marginal cases.

Alternatives to Traditional Thresholds

One prominent alternative to income-based poverty thresholds is the Multidimensional Poverty Index (MPI), which assesses deprivations across health, education, and living standards rather than solely monetary metrics. Developed in 2010 by the Oxford Poverty and Human Development Initiative (OPHI) and the , the MPI draws from Amartya Sen's and uses a set of 10 weighted indicators: nutrition and (health, one-third weight); years of schooling and school attendance (education, one-third); and cooking fuel, , drinking water, electricity, housing, and assets (living standards, one-third). A is deemed multidimensionally poor if deprived in at least one-third of these weighted indicators, with the index aggregating both incidence (headcount) and intensity of poverty. In the 2023 Global MPI, covering 112 countries and 1.1 billion people, 8.5% of the population in those nations were multidimensionally poor, often revealing higher poverty rates than monetary measures alone in regions like and , where non-income deprivations persist despite income gains. This approach addresses limitations of absolute thresholds by capturing overlapping vulnerabilities, such as how poor exacerbates issues independently of income, though critics note challenges in indicator selection and data comparability across contexts. The , pioneered by economist in works like (1999), provides a theoretical foundation for such multidimensional measures by redefining poverty not as insufficient resources but as restricted abilities to achieve valued "functionings"—such as being nourished, educated, or mobile. Sen argued that income thresholds overlook conversion factors like gender norms, disabilities, or environmental conditions that determine what resources enable; for instance, identical incomes may yield differing outcomes for urban versus rural households due to access to public goods. Operationalized in tools like the (HDI) since 1990 and the MPI, this framework prioritizes freedoms and agency over utility or opulence, influencing policies in and that target capability enhancements like education access. However, its abstract nature complicates precise thresholding, as selecting relevant capabilities requires normative judgments, potentially introducing subjectivity despite empirical grounding in cross-country surveys. Subjective well-being (SWB) measures offer another alternative by incorporating individuals' self-reported perceptions of economic welfare, such as asking households to identify minimum income needs for "being non-poor" or rating life satisfaction on scales like the Cantril ladder. Employed in World Bank Living Standards Measurement Studies (LSMS) and OECD guidelines, these elicit poverty lines endogenously—for example, in rural Ethiopia surveys, subjective thresholds often exceed objective ones by 20-50% due to aspirations for social norms like children's schooling. SWB correlates moderately with income at low levels but plateaus at higher ones, highlighting relative deprivation's role; studies in Latin America show subjective poverty predicting mental health declines more than absolute income in unequal settings. Yet, these measures risk cultural biases, as expectations inflate in high-inequality societies, and they depend on survey reliability, with response biases like social desirability affecting validity. Proponents argue SWB complements objective metrics by revealing unmeasured hardships, such as stigma or insecurity, fostering policies like conditional cash transfers tied to perceived needs.

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