New global poverty line of $1.90 at 2011 purchasing power parity – is it too high?
The World Bank’s new poverty line of $1.90 a day is the most drastic adjustment yet in the global poverty threshold—raising the measure by 50% from $1.25. The new line seems high at first glance, but the reality is that it is not higher and rather understates the true extent of global poverty. The reason is that the poverty line has not been raised by 50%, but simply rebased on 2011 purchasing power parity (PPP). The PPP is used to account for changes in the poor’s living costs. The result: the new poverty line is roughly equivalent to the old one in real terms. In 2011, the percentage of people estimated to be living in extreme poverty around the world was 14.5% based on the old poverty line of $1.25 compared to 14.2% using the new line of $1.90 in 2011 PPP.
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