Ending Extreme Poverty by 2030 requires a reduction in inequality

Global Development

Key Points

  • Extreme Poverty will not be eliminated by 2030 unless there is a historically unprecedented reduction in inequality.
  • The continuation of recent high economic growth rates for the next 15 years will not be enough to reach a 3% global extreme poverty rate by 2030.
  • For extreme poverty to be eliminated, the incomes of the bottom 40% of the income distribution (the poorest people) must grow an extra two percentage points higher than the average economic growth rate for the next 15 years.

Background

The latest estimates from the World Bank show that eliminating extreme poverty by 2030 is beyond humanity’s grasp, unless unparalleled steps are taken to reduce inequality. This is an important finding given that world leaders are set to commit to ‘Zero Poverty’ by 2030 as part of the United Nations Sustainable Development Goals (SDGs) Agenda. Reducing poverty and the SDGs are clearly about more than increasing incomes through economic growth. They are about broader issues such as health, education, gender equality, environmental sustainability, employment etc. However at the heart of SDGs is the notion of eliminating extreme poverty (defined as 3% or less of the world’s population living below $1.25 a day).

The continuation of recent high economic growth rates throughout most parts of the developing world will not be enough to reduce extreme poverty. Figure 1 shows how the global poverty rate is likely to change based upon historical growth patterns. Even in the best-case scenario, extreme poverty is likely to remain above 5% of the world’s population by 2030. While if growth rates are lower than they have recently been, like they were in the 1980s, then the global extreme poverty rate could be as high in 2030 as it is today.

Figure 1 – Changes in Extreme Poverty based upon different growth rates

Figure 1

The above predictions hold inequality constant. However if inequality was also reduced, along with these patterns of economic growth, extreme poverty could be eliminated. Figure 2 shows that if the incomes of those in the bottom 40% of the income distribution grow by an extra two percentage points faster than the average growth rate the target of a 3% global extreme poverty rate can be reached. This relies on growth rates continuing to be as high as they were in the 2000s and that the poorest people benefit the most from economic growth.

Figure 2 – Changes in Extreme Poverty based upon Growth for the Bottom 40%

Figure 2

Reducing inequality alongside growth appears to be a key factor in eliminating poverty. However achieving this will require significant changes to see the poor benefit the most from economic growth. These changes are essential if world leaders are serious about Zero Poverty being reached by 2030.

Source:

World Bank 2014 <http://www.worldbank.org/en/topic/measuringpoverty/publication/a-measured-approach-to-ending-poverty-and-boosting-shared-prosperity>

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What does the G20 have to do with the World’s Poor?

Global Development

This week World Leaders are meeting in Brisbane, Australia for the 2014 G20 Summit. To find out more about what this has to do with the World’s Poor, check out the infographic below and this blog.

GuideToG20Infographic_v2

Ebola’s Other Impact

Global Development

Author: Kenny Wu

By now, most of us who stay current with the news have heard of the outbreak of an alarming and deadly disease–

Ebola.

While getting infected with Ebola is a frightening prospect, those of us fortunate enough to live in the developed world have, in reality, an infinitesimal chance of catching the virus. In the United States, only 2 out of the nation’s 318,946,000 people have contracted Ebola. The story in West Africa (more specifically, Guinea, Liberia, and Sierra Leone) is drastically different. Ebola is not only a very real threat to the lives of West Africans, but the international perception of Ebola poses a serious menace to their livelihoods, especially since worldwide reaction to Ebola has been vastly disproportionate to the risk of contagion.

Compared with measles, where one infected person transmits the disease to an average of 18 other people, Ebola only transmits to 2 other people. Combined with Ebola’s inability to spread until symptoms show, the disease is, in fact, quite manageable for many developed countries. Tom Frieden, director of the CDC, has said that an outbreak of Ebola is highly unlikely in the U.S. Yet, transportation channels to West Africa have been shut down, West African exports have been greatly reduced, and farming and mining in affected nations slowed down.

While medical treatment and prevention of Ebola may be a burden on West African wallets, what economists call “aversion behavior” to Ebola stands to impact more West Africans economically than the disease itself. In the past 12 months, this fear-driven behavior has already cut deeply into the national growth rates of Guinea, Liberia, and Sierra Leone, and devastated a multitude of industries ranging from agriculture to tourism. As outsiders stop traveling to West Africa and importing West African goods, fear of Ebola may further damage an already economically fragile weak region.

If Ebola is curbed soon, West Africa can rebound from a modest $3.8 billion hit to its economy. If Ebola rages on unchecked throughout the region, West Africa stands to lose $32.6 billion by the end of 2015, a much more substantial hit that can take decades to recover from. Bearing the brunt of this hit are the poor, who will likely be more affected, both in numbers and magnitude, by poverty-related diseases such as TB, malaria, and dysentery.

impact_of_ebola

Sadly, many Western media sources have been harnessing fear of Ebola to fuel their stories. We can rise above the fear-mongering by staying informed about the disease. Those of us served by powerful and capable governments, can also put pressure on our politicians and lawmakers to take action in the fight against Ebola, protecting not only ourselves, but the welfare and livelihoods of our West African neighbors as well.

Sources: 

1] http://www.forbes.com/sites/timworstall/2014/09/05/the-economic-effects-of-ebola-on-west-africa-its-because-of-the-way-the-economies-are-structured/

2] http://blogs.worldbank.org/developmenttalk/ebola-s-economic-damage-africa-how-much-how-long

3] http://www.worldbank.org/en/region/afr/publication/ebola-economic-analysis-ebola-long-term-economic-impact-could-be-devastating

 

Information about the Author: Kenny is a graduate from UCLA with a degree in Economics and Global Studies. He has spent the last few years traveling the world and documenting stories of people living in the developing world. He is currently the Director of Marketing for Coffee 4 Kids Honduras, a nonprofit that sells high-quality Honduran coffee to help provide medical treatment and nourishment to Honduran children.

Revised Commonwealth Games Medal Tally

Global Development

This is the final re-post of the mini-series on the most popular posts on Poverty Analysis

PovertyAnalysis

As the 2014 Commonwealth Games come to end have you ever wondered how fair the playing field is?

Most members of the Commonwealth are developing countries and many are small islands. Only a few countries, like the United Kingdom, Australia and Canada, are rich enough and have sufficiently large populations to have well nourished populations that have time to hone their skills in competitive sports. This significantly reduces the competition at the top of the medal tally. For example, to illustrate the inequality between Commonwealth countries compare the richest and poorest countries. The richest country, Australia, has over 125 times more income per person than the poorest country, Uganda.

Countries rankings would change dramatically if the medal tally were revised to adjust for differences in income per person and population size, as has been done for the table below. This removes disparities in wealth and population and allows for a…

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The World Cup is an Uneven Playing Field

Global Development

Another one of the most popular blogs on Poverty Analysis

PovertyAnalysis

A country’s chance of winning the World Cup is strongly related to the size of its population and how rich the population is. Countries with bigger populations have a larger pool from which talented players can be sourced and richer countries are better able to nurture their players. All, except two (Uruguay and Colombia), of the top 15 ranked World Cup teams are from countries that have populations over 8 million people and income per person over US$12,000 a year. These countries have among the highest incomes and largest populations in the world and appear in the top right of the chart below.

Final World Cup Graph

Between the World Cup countries, an uneven playing field still exists. The richest qualifying country, Switzerland, has around 80 times more income per person, than the poorest qualifying country, Cameroon. While the largest country in terms of population, the United States, has almost 100 times more people…

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Australia’s 2014-15 Aid Budget

Australian Aid Policy

Another one of the most popular posts on Poverty Analysis

PovertyAnalysis

Key Points

On Tuesday, the Australian Government not only cut the aid budget, but it also further redirected aid away from the majority of the world’s poor.

  • Australia spends less than $1 in aid per person in the developing world each year. This makes it incredibly important where the aid is spent.
  • Australia’s largest aid partners in the Pacific receive up to almost a $1 per person every day. This is more than 1,500 times the amount of aid Australia provides per person to Sub-Saharan Africa.
  • While reducing the overall aid budget, the Government increased aid to the Pacific and more than halved aid to Sub-Saharan Africa.

Background

On Tuesday, the Australian Government cut the aid budget for the sixth time in two years and it further redirected aid away from the majority of the world’s poor. As outlined in this post here, the Australian aid program does not…

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How Rich am I?

Global Development

One of the most popular posts on Poverty Analysis

PovertyAnalysis

Have you ever wondered how rich you are relative to the rest of the world?

The organisation Giving What We Can has put together a calculator where you can find out your rank in the World Income Distribution. The calculator is available here: http://www.givingwhatwecan.org/why-give/how-rich-am-i?

Take a look for yourself and share with your networks. The result might surprise you. As can be seen in the chart below the world is very unequal…

world-income-distribution

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Millennium Development Goals Scorecard

Global Development

This month world leaders are set to discuss the next Millennium Development Goals (MDGs), but it is also important to reflect on progress towards the current goals. The MDGs expire in less than 500 days and it is likely that more than half of the goals will not be met. The table below provides a simplified ‘traffic light’ breakdown of how the world has performed (green meaning the goal has been met, orange meaning some sub-goals have been met and red highlighting significant progress is still required).

MDG Scorecard Table

While there is much to celebrate in terms of the progress that has been made towards the MDGs, it is important not to lose track of just how much still needs to be done. For example, there has been limited progress towards Goal 5: Improving Maternal Health. The chance of a women dying during childbirth has fallen from 430 per 100,000 live births in 1990, to 230 per 100,000 live births in 2013. However, this is still far from the goal to reduce maternal mortality by three-quarters by 2015 (down to 108 per 100,000 live births). World leaders must not ignore the MDGs that are still to be met, such as improving maternal health, when planning for the future.

To find out more about progress towards the Millennium Development Goals, check out the 2014 Report, available here.

Lets be clear on what the “middle class” is

Global Development

Key Points

  • A number of world leaders, including the Australian Prime Minister, have claimed that millions of people have been lifted out of extreme poverty and are now living in the “middle class”.
  • However, there is no universally accepted definition of “middle class” and the use of this term is often very misleading. The “middle class” in developed countries, such as Australia, have substantially higher living standards than the vast majority of people in developing countries.
  • While there have been large reductions in extreme poverty over the last twenty years, 93% of people in the developing world still live below the United States’ national poverty line of less than US$13 a day.

Background

Earlier this year, the Australian Prime Minister claimed that hundreds of millions of people have been lifted from extreme poverty to “middle class” and there are now almost two billion people in the global “middle class”. Statements such as this do not represent how the notion of “middle class” is typically understood in the developed world.

The lowest possible standard of middle class in a developed country is living above the United States’ national poverty line (defined as $13 a day (2005 US PPP)). According to the latest World Bank data, 93% of the developing world’s population live below this line. As the chart below shows the huge decline in people living in extreme poverty has not been matched by a decline in the share of people living below the United States’ national poverty line.

From Poverty to Middle Class

The incredible reduction in the population living below the extreme poverty line (shown in the chart above) should be celebrated. However this should not be misrepresented to suggest most of these people live in “middle class” by any developed country standard.

Sources:

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

Australian Government 2014 <https://www.pm.gov.au/media/2014-01-23/address-world-economic-forum-davos-switzerland-0>

Child Labour: The Facts

Global Development

Author: Rachel Hoy

If you asked a stranger on the street how they felt about child labour, it’s safe to say most people would not offer support for it. Yet evidence about the widespread damaging effects of child labour is overwhelming and we need to do more than hold a moral card against it, especially when we often support the demand for child labour unknowingly through our purchases.

There are 168 million child labourers around the world today. Around half are estimated to be in a hazardous form of labour.

Over 10% of the world’s children over 5 years old are child labourers. That means that one child in every ten is currently working under conditions detrimental to their physical and mental health.

Image 1

This is the same percentage of people who travel to work via public transport in Australia.

More than 2 out of 5 child labourers are aged between 5 and 11 years old. That means nearly half of child labourers are younger than Australian high school age.

Image 2

This is more than the percentage of people in Australia who own one car.

More than 1 in 5 children in Sub-Saharan Africa are engaged in some form of child labour. That means in a group of five friends, one is unable to attend school due to being forced into child labour.

Image 3

This is around the same percentage of people in Melbourne who live in a two-bedroom household.

These are just some of the facts surrounding the pervasiveness of child labour. Child labour is declining due to collective efforts but it is clear there is a long way to go. While these statistics are alarming, behind each statistic lies a personal story – both heartbreaking and mostly preventable.

A good start to preventing demand for child labour is to know the standards of the product that you buy. Try downloading the shopethical! app for your next trip to the supermarket or asking your local café about their coffee and tea suppliers.

Source:

World Vision Australia 2014 <http://www.worldvision.com.au/Libraries/Child_Labour_Myths_report/Child_Labour_Myths_Media_Report_12Jun14.pdf>

Information about the Author: Rachel Hoy is a VGen Youth Campaigner for World Vision Australia who works on the #FreeTo campaign. She just completed a Master of development studies at the University of Sydney.