How much more income do the poor need to reach the extreme poverty line?

Global Development

Key Points

The end of extreme poverty has never been so affordable.

  • The additional income required for everyone to be lifted out of extreme poverty is the equivalent of only 0.05% of World Gross Domestic Product (GDP).
  • This is the smallest increase in income (as a fraction of global income) required to end extreme poverty in human history.

Background

The additional income needed for people in extreme poverty to reach the poverty line is defined as the ‘poverty gap’. The chart below shows that over the last 20 years, the global extreme poverty gap has shrunk from over 25 cents to below 10 cents as the average income of those in extreme poverty has increased.

Poverty Gap

The share of global income required to fill the extreme poverty gap has never been so small. As shown in the chart below, over the last 20 years the share of World GDP required to fill the extreme poverty gap has fallen from 0.35% to 0.05%.

Share of World GDP

The actual cost of raising people out of extreme poverty is likely to be significantly larger than the poverty gap. This is because there are costs associated with getting resources to those in extreme poverty, whether through direct cash transfers, income generation activities or other mechanisms.

This analysis provides even further reason to believe that extreme poverty can be eliminated within a generation. Furthermore, it discredits cynics who argue that the world can’t afford to eliminate extreme poverty.

Sources

World Bank 2014A <http://iresearch.worldbank.org/povcalnet/index.htm>

World Bank 2014B <http://data.worldbank.org/data-catalog/world-development-indicators>

 

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