Raising the Bar on Poverty: Why the World Bank’s New Definition Matters

For decades, the global fight against extreme poverty has often been distilled into a simple benchmark: a dollar-a-day. Back in 1990, this metric was used by the World Bank to measure extreme poverty, a grim reality defined by the barest essentials needed to survive in the world’s poorest countries. Over time, that line rose slightly with inflation to today’s $2.15 (PP). This value remains a yardstick for capturing extreme deprivation in the lowest-income nations, covering basic needs like food, shelter, and clothing.

But in 2024, the global picture is far more complex. The world’s population has swelled by over 50%, now surpassing 8 billion. More than three-quarters of humanity lives in middle-income countries, a huge shift from 1990 when nearly 60% resided in low-income settings. Many nations have graduated from low-income status, including economic giants like China and India. With this shift comes a new reality: the $2.15 line doesn’t paint a complete picture anymore, especially in regions where economic growth has expanded what it means to be impoverished.

Enter the World Bank’s new upper-middle-income poverty line of $6.85 a day, pegged to 2017 prices and expressed at purchasing power parity. Think of it as a richer, more demanding measure of what a “liveable” life should include: not just basic food and shelter, but also access to education, sanitation, internet connectivity, and electricity. These aren’t luxury goods—they’re the necessities of modern life. While some may quip that the World Bank is trying to make poverty “expensive,” it’s a vital update that reflects how the world has changed.

The Middle-Income Squeeze

Consider this: under the $6.85 benchmark, around 3.5 billion people are still classified as poor—a number nearly unchanged from 1990 due to population growth. This new poverty line shifts the focus to a demographic often missed in global statistics—the billions living on less than $6.85 but above $2.15. These people are vulnerable to economic shocks, climate disasters, and other risks that can easily plunge them back into dire poverty.

The regional picture also transforms dramatically under this higher bar. Sub-Saharan Africa sees its share of the global poor drop from two-thirds to around a third, while South Asia’s share doubles from 21% to 42%. Suddenly, policymakers can’t ignore middle-income countries’ poverty challenges, where the majority of the world's extreme poor now reside. It's like moving from “one-size-fits-all” to a more tailored approach in the fight against poverty.

Progress and Paradoxes

Progress is tangible — less than 9% of the world now lives on less than $2.15 a day. But lifting people out of the direst straits often reveals a higher mountain to climb. Addressing poverty at $6.85 (PPP) means grappling with education quality, healthcare access, job security, and digital divides. It’s a reminder that poverty isn’t a static issue; as economies evolve, so too must our measures and solutions.

The World Bank’s expanded definition serves as a wake-up call: eradicating extreme poverty remains critical, but tackling broader poverty is equally pressing. It’s a marathon, not a sprint—and this new measure ensures we’re running toward the right finish line.

Glossary of Key Terms:

1. Absolute Poverty Line - A fixed standard of what is considered the minimum level of income necessary to cover basic living needs, such as food, shelter, and clothing.
2. Demographic Structure - The composition of a population, often broken down by age, income level, or other key characteristics.
3. Extreme Poverty - Living on less than a certain threshold, set by the World Bank at $2.15 a day, indicating severe deprivation of basic human needs.
4. Middle-Income Countries - Nations with a Gross National Income (GNI) per capita that falls between low- and high-income classifications, as defined by the World Bank.
5. Purchasing Power Parity (PPP) - A method of measuring economic variables that accounts for the cost of living differences between countries.
6. Sustainable Development Goal (SDG) - Global goals set by the United Nations to address social, economic, and environmental challenges, including eradicating poverty.
7. Upper-Middle-Income Poverty Line - A new poverty benchmark set by the World Bank at $6.85 a day, reflecting higher income levels and broader living standards.

Retrieval Questions for A-Level Students:

1. What was the original poverty line set by the World Bank in 1990, and how has it evolved over the years?
2. Explain why the World Bank introduced a new upper-middle-income poverty line of $6.85.
3. What major demographic shifts in global income levels have occurred since 1990?
4. How does the new $6.85 poverty line change the regional profile of poverty, particularly in Sub-Saharan Africa and South Asia?
5. Why is it important to consider more than just basic food and shelter when measuring poverty?
6. What is meant by "purchasing power parity," and why is it important in measuring global poverty?
7. How does the World Bank’s mission relate to the Sustainable Development Goals?