The World Bank is to make the most dramatic change to its global poverty line for 25 years — raising its measure by a half to about $1.90 per day — in a move likely to swell the statistical ranks of the world’s poor by tens of millions.
The move from $1.25 would be the biggest revision since the World Bank introduced its $1 a day yardstick of global poverty in 1990.
World leaders meet on Friday at the UN headquarters to commit to 17 new “sustainable development goals” meant to guide development policy for the next 15 years.
The first and most prominent is the eradication by 2030 of “extreme poverty everywhere” as defined by the World Bank’s $1.25 a day line.
The bank is expected to follow the event by shifting its poverty line to about $1.90 ahead of its annual meetings in Lima, Peru, in early October — a move likely to result in significant shifts in the estimated size and distribution of the planet’s poor.
It is difficult to predict exactly how many more people will be defined as poor. However, when researchers at the bank tested a notional poverty line of $1.92 earlier this year, it led to a surge of 148m.
Most of the difference came in east Asia where the ranks of those falling below the poverty line almost doubled from 157m at the old $1.25/day measure to 293m. In Latin America, the result was an increase of 8m, or more than 25 per cent, in the number of poor to 37m, while in south Asia the ranks of the poor grew by 7m to 407m. Under that line, sub-Saharan Africa remained steady at some 416m.
In an interview with the Financial Times, Jim Yong Kim, the World Bank president, said the decision to adjust the poverty line was a necessary update due to new data on purchasing power. The new line, he said, had been “very well vetted” by the bank’s poverty experts.
“We don’t think we moved the goalposts,” he said. “We think we simply updated the goalposts to 2015.”
The move follows more than a year of discussions within the bank following the release of new purchasing power parity (PPP) estimates, meant to facilitate a better comparison of the relative buying power of consumers around the world and the size of economies.
The shift is likely to renew a debate over the robustness of the World Bank’s poverty line. Earlier this year, it assigned a new commission, led by the British economist Sir Anthony Atkinson, to examine ways to measure poverty and how to update the existing poverty line.
Among its members is Angus Deaton, the Princeton economist and persistent critic of a poverty line that he argues has been misleading for years. “You’ve got a line that no one knows where to put it, PPPs that change, and underlying data that is bad,” he said. “It is sort of a statistical problem from hell.”
The World Bank’s administering of the poverty line also carried a hint of conflict of interest, he said, as the bank’s main task was fighting poverty, and its very existence depended on its own poverty measures.
Mr Deaton added: “I think they have some institutional bias towards finding more poverty rather than less.”
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