World Bank says more people are poor, but fewer are in extreme poverty

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Wednesday, August 27, 2008

A slum in India, which has seen a substantial decrease in its poverty rate.
Image: meg and rahul.

According to a new study released by the World Bank, more people than thought are considered to be poor in the developing world but the percentage of people in extreme poverty have decreased. The study finds that as of 2005, there are 1.4 billion people who are living for less than US$1.25 per day. This is down from 1.9 billion in 1981, which equals half of the population in the developing world. However, the new numbers have vastly increased from previous estimates. According to last estimate based on data from 1994, it was believed that there were only 985 million people in poverty in 2004 and 1.5 billion in 1981.

Cquote1.svg The new data confirm that the world will likely reach the first Millennium Development Goal of halving the 1990 level of poverty by 2015 and that poverty has fallen by about one percentage point a year since 1981. Cquote2.svg

—Justin Lin Chief Economist and Senior Vice President, Development Economics at the World Bank

According to one of the report's authors Martin Ravallion, Director of the Development Research Group at the World Bank, "The new estimates are a major advance in poverty measurement because they are based on far better price data for assuring that the poverty lines are comparable across countries. Data from household surveys have also improved in terms of country coverage, data access, and timeliness."

The report concludes that the developing world is on track to meet its goal to cut poverty in half by 2015. However, drops in poverty will not be consistent worldwide.

East Asia has seen the biggest drop in poverty since 1981 when 80% of the population was poor. Currently, it's just 18%. South Asia has seen a drop of 20%, however the number of people in poverty has stayed the same due to an increase in population.

In India, for example, poverty at $1.25 a day increased from 420 million people in 1981 to 455 million in 2005. However, due to population growth, the poverty rate as a share of the total population dropped to 42% in 2005 from 60% in 1981.

The only region that has not seen any significant decrease in poverty is Sub-Saharan Africa where the percentage of people in poverty has stayed the same at 50%. Due to population increase, the number of people have nearly doubled to 380 million.

"The new data confirm that the world will likely reach the first Millennium Development Goal of halving the 1990 level of poverty by 2015 and that poverty has fallen by about one percentage point a year since 1981," said Justin Lin, Chief Economist and Senior Vice President, Development Economics at the World Bank.

"However, the sobering news that poverty is more pervasive than we thought means we must redouble our efforts, especially in Sub-Saharan Africa," added Lin.

The report, The Developing World Is Poorer Than We Thought, But No Less Successful in the Fight against Poverty by Shaohua Chen and Martin Ravallion, is based on data from 2005.

Sources