DEFINITION of International Poverty Line
The international poverty line is a monetary threshold under which an individual is considered to be living in poverty. It is calculated by taking the poverty threshold from each country – given the value of the goods needed to sustain one adult – and converting it into dollars. The international poverty line was originally set to roughly $1 a day. When purchasing power parity and all goods consumed are considered in the calculation of the line, it allows organizations to determine which populations are considered to be in absolute poverty.
BREAKING DOWN International Poverty Line
Using the international poverty line to determine how well off a population is can be misleading, as the line can be low enough that adding a small amount of additional income will not create an appreciable difference in a person's quality of life. In addition, it can be difficult to quantify other indicators, such as education and health, thus masking the total economic impact on a population. The international poverty line also does not take into other indicators such as the availability of sanitation, water, and electricity for those living in poverty and what effect that has on their quality of life and opportunities.
How the International Poverty Line Is Assessed
The World Bank sets the international poverty line at periodic intervals as the cost of living for basic food, clothing, and shelter around the world changes. In the 2008 update, the poverty line was set at $1.25 per day. In 2015, the threshold was updated to $1.90 per pay. That figure was set based on prices established in 2011 and that threshold should reflect that same buying power that was set with the earlier poverty line. According to the World Bank, in 2012, more than 900 million people were estimated to be living under the international poverty line. Based on data projections, the World Bank also estimated that more than 700 million people lived in extreme poverty as of 2015.
Determining how many people live in extreme poverty is not a simple calculation of the poverty rates in each country. The threshold for poverty can vary drastically from wealthy nations to countries facing economic hardship. The World Bank says it needs to measure all people against the same standard. Independent researchers working with the World Bank established the figure for the initial international poverty line, which was reassessed at later intervals taking the poorest nations into greater consideration in their calculations.
Organizations like the World Bank have made it an objective to reduce worldwide poverty and might use the international poverty line and data derived from it to assess their efforts.