geography

1. Analysing poverty
Using quantitative
methods to draw ‘the
poverty line’
Simon Oakes
Philip Allan Publishers © 2016

2. Presentation outline
• Definitions of poverty.
• An overview of global patterns and trends in absolute poverty.
• The implications of changing how absolute poverty is measured.
• The issue of relative poverty.
• Making use of mean data and the Gini Coefficient.
• An overview of patterns and trends in relative poverty.
Philip Allan Publishers © 2016

3. Definitions of poverty
Absolute poverty Extreme deprivation, generally measured in terms of living
below the $1.25 a day poverty line. Absolute poverty applies to
all countries and does not change with time.
Purchasing power
parity (PPP)
Income can be converted into equivalent PPP$ which have the
same buying power in different countries. So PPP$1 in Malaysia
will purchase the same goods and services as PPP$1 in Mali or
Monaco. This allows comparison of relative income between
countries.
Relative poverty Poverty defined in terms of the prevailing conditions in a
country at a particular time. It is often calculated against the
median income. Relative poverty varies between countries and
changes over time.
Philip Allan Publishers © 2016
Do you know what these terms mean?
Click to reveal the definitions

4. Patterns and trends in
absolute poverty
Philip Allan Publishers © 2016
Per cent of the population below the $1.25 poverty line (PPP) for
selected southeast Asian countries, 1990s and 2010
Using the US$1.25
measure, we can see
that poverty has fallen
markedly throughout
much of Asia. In China
(not shown), nearly
half a billion people
have escaped poverty.
Progress in sub-
Saharan Africa has
been slower, however.

5. Patterns and trends in
absolute poverty
• Average incomes have risen in all continents
since 1950, but only very slowly in the poorest
parts of Africa.
• Many countries have advanced from low-
income to middle-income status since the
1970s, resulting in a ‘three-speed’ world of
developed, emerging and developing
economies.
• As a result, absolute poverty has fallen
worldwide – but this statement hides the
problem some countries still face.
• By 2030, US$1.25 poverty could largely be
eradicated in Asia (see table).
Philip Allan Publishers © 2016
Extreme poverty (below $1.25 a
day) in developing Asia, 1981–
2030

6. What happens if the poverty line
is changed?
• The scale of world poverty depends on what income value statisticians choose.
• Views differ on whether US$1.25 is the best benchmark.
• The line was increased from US$1.00 to US$1.25 in 2008 due to the changing value of the
dollar. This also resulted in an additional 400 million people in the developing world
becoming classified as ‘extremely poor’.
• In recent years, the World Bank has proposed a new poverty line closer to US$2.00.
Philip Allan Publishers © 2016
‘You’ve got a line that no one knows
where to put it, PPPs that change,
and underlying data that is bad... It
is sort of a statistical problem from
hell.’
Angus Deaton, Princeton economist
and critic of the current poverty line
‘We are talking about a very dense
population of people right near the
poverty line. So little shifts in the
poverty line result in millions of
people falling into, or rising out
of, poverty.’
Peter Lanjouw, former head of World
Bank poverty research unit

7. What happens if the poverty line
is changed?
Philip Allan Publishers © 2016
300
134
106
99
27
571
358
257
209
180
39
872
Sub-Saharan
Africa
South Asia East Asia &
Pacific
India Latin America &
the Caribbean
Developing world
People living below the poverty line (m)
2011 PPP $1.25 poverty line
2011 PPP $1.78 proposed poverty line
Views differ on how much money is needed to
escape absolute poverty. In 2011, the World Bank
proposed raising the poverty line from
US$1.25 a day measure to US$1.78 a day. The
higher value increases the number of people in
extreme poverty worldwide by almost a third.

8. What happens if the poverty line
is changed?
• In 2015, the World Bank changed the poverty line from US$1.25 to US$1.90 per day.
• This ‘rebasing’ of the old line took place in order to adjust for depreciation in the purchasing
power of the dollar (rather than a re-think of how much money people need).
• Find out more about this change at: http://www.theguardian.com/society/2015/oct/05/world-
bank-extreme-poverty-to-fall-below-10-of-world-population-for-first-time
Philip Allan Publishers © 2016
’A poverty line that is constant in real terms in poor countries,
is now higher in US dollars. US$1.90 in 2011 buys approximately
the same things as US$1.25 did in 2005 in poor countries... That
the value is higher in US dollar terms is merely a reflection of a
weaker dollar in purchasing power parity (PPP) terms!’
Francisco Ferreira, World Bank Chief Economist

9. How are patterns of
relative poverty changing?
• According to the US$1.25 measurement, absolute poverty has been halved globally since
the introduction of the Millennium Development Goals in 2000, with the greatest progress
made in Asia.
• But the number of people living in relative poverty has risen in many societies during the
same time period. When the assets and earnings of the hyper-rich balloon in value, the
average (per capita) level of wealth rises.
• As a result, some poorer people — whose earnings are static or have risen modestly —
are reclassified as having below-average incomes despite the fact they have experienced
no material decline in wealth.
• In China, India and Indonesia especially, the majority of people are economically worse-off
than ever before in relation to the richest members of society — even if that same majority
are generally better-off than previous generations when income is measured in real terms.
• We live in a world where, often, the rich get richer while the very poorest do not. As a
result, relative poverty has risen in many places because the data are derived from mean
income levels. Can you see why this is the case?
Philip Allan Publishers © 2016

10. How are patterns of
relative poverty changing?
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Growth incidence of expenditure by quintile, Indonesia and Lao
PDR (annual growth of mean per capita expenditure by quintile)
The mean spending
power increase in
both countries looks
impressive. However,
80% of people in
both countries have
experienced below-
mean growth: look
closely at how the
richest quintile have
driven growth
overall.

11. How are patterns of
relative poverty changing?
Philip Allan Publishers © 2016
In the USA, there
is now enormous
income inequality.
Relative poverty is
defined as a
‘three-person
household
earning less than
$31,402 a year’.
There are now 49
m adults in this
bracket in the
USA, up from 43
m in 2008.
Household income in the USA, 2014 (US$)

12. The Gini coefficient
Philip Allan Publishers © 2016
HDI
rank
GDP per capita
(nominal, US$,
2014)
Share of national
income going to
poorest fifth of
population (%)
Share of national
income going to
richest tenth of
population (%)
Gini coefficient
High HDI
12 Sweden 49,000 12 30 25
14 UK 46,000 6 29 38
Medium HDI
91 China 7,600 4 35 37
108 Indonesia 3,500 8 29 33
135 India 1,600 8 31 34
Low HDI
180 Uganda 700 4 42 44
164 Burundi 300 7 33 33
Gini coefficient is a
number between 0 and
100. The higher the
value, the greater the
degree of income
inequality. A value of 0
suggests that everyone
has the same income
whereas as value of 100
would mean a single
individual receives all of
a country’s income.
Task: Describe the pattern of inequality shown by
the Gini coefficient data.

13. Poverty and inequality facts
The findings of the World Bank’s Poverty Unit report provided a useful snapshot of the
world in 2011. Here are just some of its findings.
• The world’s rich countries still account for 50% of global GDP while containing only
17% of the world’s population.
• Low income economies account for only 1.5% of the global economy, but nearly 11%
of the world population.
• Roughly 28% of the world’s population lives in economies with GDP per capita
expenditures above the US$13,460 world average and 72% in economies that are
below average.
• Six of the world’s 12 largest economies are in the middle-income category. When
combined, the 12 largest economies account for two-thirds of the world economy, and
59% of the world population.
• The four most expensive countries to live in are Switzerland, Norway, Bermuda and
Australia, with the cheapest being Egypt, Pakistan, Myanmar and Ethiopia.
Philip Allan Publishers © 2016

14. Further research
Philip Allan Publishers © 2016
The World Bank’s poverty home page with the latest news and commentaries
from a key mainstream institution: www.worldbank.org/en/topic/poverty
The entry portal to the World Bank’s poverty data, where you can select
countries, regions and time periods, and generate maps and
graphs:http://data.worldbank.org/topic/poverty
The international NGO Oxfam provides an alternative voice about poverty and
its causes: www.oxfam.org/en

15. Philip Allan Publishers © 2016
This resource is part of GEOGRAPHY REVIEW, a magazine written for A-level
students by subject experts. To subscribe to the full magazine go
to: http://www.hoddereducation.co.uk/geographyreview