Billions in foreign aid could be used more effectively if international poverty statistics were more accurate, says new research from King’s College London.
The study claims that current methods for setting the international poverty line give a misleading picture of global poverty, which hinders efforts to fight it.
“Right now, donors can’t target their funds properly because the information they rely on isn’t good enough. The $2.15 per day poverty line means different things in different countries, even among low-income ones,” the researchers state.
Calculating poverty
The new analysis critiques the current method of calculating the poverty line, uncovering several flaws.
For example, the authors point out that the COVID-19 pandemic likely increased global poverty. However, the uncertainty in poverty line calculations makes it difficult to determine how much poverty has risen or where it’s most severe.
The World Bank sets the international poverty line by taking the median value of national poverty lines from low-income countries.
In middle- and low-income nations, national poverty lines usually reflect the cost of food providing about 2,100 calories per person per day, plus a budget for basic non-food needs like housing, education, healthcare, heating, transportation, clothing, and communication.
Comparable metrics
The key is making sure living standards are comparable across countries.
The authors argue that if the poverty line doesn’t achieve this, our understanding of poverty is unclear, leading to poorly informed global policies.
For instance, updating the poverty line to $2.15 per day (in 2017 prices) is said by the World Bank to have a minimal effect on poverty stats. But the study shows this could impact as many as 190 million people.
The main problem is with comparing “purchasing power,” which is central to poverty line calculations. Economists use purchasing power parities to compare average incomes across countries, but these aren’t always reliable for comparing living standards.
A simple idea
Dr. Moatsos explains that while the idea is simple and appealing, its practical use leads to issues that distort global poverty comparisons.
“By using different living standards across countries to judge global poverty, we can’t inform policies or distribute funds accurately, making the current method misleading,” the authors say.
They suggest abandoning the “one-size-fits-almost-all” approach and adopting a clear definition of absolute poverty.
An alternative exists in the UN’s Copenhagen Declaration on Social Development from 1995, agreed upon by 186 member states. This declaration defines absolute poverty but is not yet applied consistently.
The authors conclude that it’s urgent for official bodies to adopt alternative methods for monitoring global poverty.
