The State of the Poor: Where are the Poor and where are they Poorest?

Extreme poverty in the world has decreased considerably in the past three decades (figure 1). In 1981,
more than half of citizens in the developing world lived on less than $1.25 a day. This rate has dropped
dramatically to 21 percent in 2010. Moreover, despite a 59 percent increase in the developing world’s
population, there were significantly fewer people living on less than $1.25 a day in 2010 (1.2 billion) than
there were three decades ago (1.9 billion). But 1.2 billion people living in extreme poverty is still a
extremely high figure, so the task ahead of us remains herculean.

To accelerate poverty reduction and end extreme poverty by 2030, we need to know who are the poor,
where do they live, and where poverty is deepest.

How have the different regions of the developing world performed in terms of extreme poverty reduction?

Extreme poverty headcount rates have fallen in every developing region in the last three decades. And
both Sub‐Saharan Africa (SSA) and Latin America and the Caribbean (LAC) seem to have turned a corner
entering the new millennium. After steadily increasing from 51 percent in 1981 to 58 percent in 1999, the
extreme poverty rate fell 10 percentage points in SSA between 1999 and 2010 and is now at 48 percent—
an impressive decline of 17 percent in one decade. In LAC, after remaining stable at approximately 12
percent for the last two decades of the 20th century, extreme poverty was cut in half between 1999 and
2010 and is now at 6 percent.

Fig 1: The Evolution of Extreme Poverty Rates by Region

90 Extreme Poverty Rates (%)
84

80

70
66
61 62
60 60
60 58
57
51 51 52
50 48 48
46
44 43
1981
40 1990
36 35
34
33 1999
30 2010
26

21
20
13
12 121212
10
10
6 6 5
4
2 2 2
1
0
China EAP without Europe and Latin America Middle East India South Asia Sub‐Saharan Developing
China Central Asia and the and North without India Africa World
Caribbean Africa

Source: World Bank staff estimates.

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Draft. Prepared by Pedro Olinto and Hiroki Uematsu, Poverty Reduction and Equity Department

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However, despite its falling poverty rates, Sub‐Saharan Africa is the only region in the world for which
the number of poor individuals has risen steadily and dramatically between 1981 and 2010 (figure 2).
There were more than twice as many extremely poor people living in SSA in 2010 (414 million) than there
were three decades ago (205 million).

Fig 2: Number of Extremely Poor Individuals by Region (million)

Number of Poor by Region (million)
2000

205
1800
239 290 330
140 257
1600
147 169 349 376
170
150 390
1400 429
167 147
427
1200 448
462 156 395
43 443
399
1000 53 473 414
261 53 463
53 132
49 484
250 126
800 243
238 107
262 60
54
600 466
197 209 63 445
400
835 160
400
720 683 48
586 633 37
120 32
200 443 446 111 90
363
212 173 156
0
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2010
China EAP without China Europe and Central Asia Latin America and the Caribbean
Middle East and North Africa India South Asia without India Sub‐Saharan Africa

Source: World Bank staff estimates.

As a result, while the extreme poor in SSA represented only 11 percent of the world’s total in 1981,
they now account for more than a third of the world’s extreme poor (figure 3). India contributes
another third (up from 22 percent in 1981) and China comes next contributing 13 percent (down from
43 percent in 1981).

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 Figure 3. Regional shares of the world’s extreme poor population
Regional Share of The World's Extreme Poor Population (%)
100%
11 13 15 15 17
90% 20 22 24
7 28 31
8 34
80% 8 9
9
10 8
70% 22 10
23 9
25 23 10
60% 24 9
2 27
27
3
50% 3 30
13 3
3
13 34
13 34
40% 15 12 3 3 33
4
30% 12 12
10 3
3 3
20% 43
39 36 9
33 33 9 7
26 26
10% 22
15 13 13
0%
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2010

China EAP without China Europe and Central Asia

Latin America and the Caribbean Middle East and North Africa India
South Asia without India Sub‐Saharan Africa

Source: World Bank staff estimates.

How poor are the extremely poor? Have they become poorer in the last three decades?

Figure 4 plots the average daily per capita income of the extremely poor in the developing world as a
whole, in the Sub‐Saharan Africa region, and in the developing world excluding Sub‐Saharan Africa. As
shown, the average income of the extremely poor in the developing world has been rising and steadily
converging to the $1.25 per day poverty line. In 2010, the average income of the extremely poor in the
developing world was 87 cents per capita per day, up from 74 cents in 1981 (in 2005 US dollars). If the
extreme poor in Sub‐Saharan Africa were not included, the average income of the world’s poor would
have converged even faster to the $1.25 line (figure 4).

This increase in incomes of the extreme poor is unfortunately not seen in Sub‐Saharan Africa. Between
1981 and 2010, the average income of the extremely poor has remained flat at approximately half of
the $1.25 line in that region.

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 Figure 4. The evolution of the average per capita income of the extreme poor

Average per capita Income of the Extreme Poor

$1.25

$1.00 0.94 0.96

0.93
0.89 0.88 0.89
0.84 0.84 0.86
0.82
0.74 0.85 0.85 0.87 0.87 0.87
0.83 0.84
$0.75 0.74 0.80 0.82 0.82
0.72 0.70 0.70 0.70 0.71 0.71 0.71
0.69 0.68 0.69 0.69

$0.50
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2010

Sub‐Saharan Africa
Developing World
Development World without Sub‐Saharan Africa
Source: World Bank staff estimates.

Where is extreme poverty deepest and therefore hardest to end?

Accelerating extreme poverty reduction is a huge challenge in both sub‐Saharan Africa and South Asia,
given that there are approximately 400 million and 500 million extreme poor people in these regions
respectively. The depth of extreme poverty is commonly measured by the extreme poverty gap. When
expressed in dollars based on Purchasing Power Parity (PPP) calculations, the extreme poverty gap
represents the average amount of additional daily income needed by the extremely poor to reach the
poverty line of $1.25 per day. Thus, from figure 4, we can see that the average gap of the extremely poor
in the world is 38 cents per day, or approximately $140 per year in 2005 PPP dollars. Since there are 1.2
billion extremely poor individuals in the world, the aggregate global extreme poverty gap amounts to
approximately $169 billion dollars in 2005 PPP dollars, or approximately $197 billion in 2010.

That is, if the incomes of every extremely poor person were to rise to the $1.25 line, the aggregate
increase in their income would need to total at least $169 billion dollars in 2005 PPP terms. We call this
number the aggregate extreme poverty gap. This represents approximately 0.25 percent of global GDP.
It is important to note that extreme poverty gap is the conceptual amount of direct additional income an
average extremely poor person would need to get to $1.25 per day and is not indicative of the level of
assistance required to close the gap.

The aggregate global extreme poverty gap in 2010 was less than half the gap in 1981 ($362 billion in 2005
PPP terms), a faster reduction than the reduction in the number of poor.