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Extreme poverty: how far have we come, how far do we still have to go?

Throughout this article – and in global income and expenditure data generally – the statisticians who produce these figures are careful to make these

Throughout this article – and in global income and expenditure data generally – the statisticians who produce these figures are careful to make these numbers as comparable as possible.  

Non-monetary sources of income are taken into account: Many poor people today and in the past rely on subsistence farming and do not have a monetary income. To take this into account and make a fair comparison of their living standards, the statisticians that produce these figures estimate the monetary value of their home production and add it to their income/expenditure.

Data is measured in international-$, which means that differences in purchasing power and inflation are taken into account: The data is expressed in international dollars. This is a hypothetical currency that results from the price adjustments across time and place.2  An international dollar is defined as having the same purchasing power as one US-$ in the US. This means no matter where in the world a person is living on int.-$30, they can buy the goods and services that cost $30 in the US. None of these adjustments are ever going to be perfect, but in a world where price differences are large it is important to attempt to account for these differences as well as possible, and this is what these adjustments do.3

Throughout this text I’m always adjusting incomes for price changes over time and price differences between countries in this way. All dollar values discussed here are presented in int.-$; the UN does the same for the $1.90 poverty line. Sometimes I leave out ‘international’ as it is awkward to repeat it all the time; but everytime I mention any $ amount in this text I’m referring to international-$ and not US-$.4

Global data is a mix of income and expenditure data: There is no global survey of incomes: researchers need to rely on the available national surveys. Such surveys are designed with cross-country comparability in mind, but because they reflect the circumstances and priorities of individual countries there are some important differences across countries. In most high-income countries the surveys capture people’s incomes, while in poorer countries these surveys tend to capture people’s consumption. The two concepts are closely related: the income of a household equals their consumption plus any saving (or minus any borrowing).6 When speaking about these statistics it would therefore be accurate to speak about ‘the income of people in richer countries and the monetary value of consumption in poorer countries’. But since it’d be a bit much to repeat this every time researchers simply speak of ‘living standards’ or ‘income’ instead. I do the same in this text.