With today’s release of an updated version of the World Bank’s PovcalNet data site, it is a good time to take stock of progress toward Sustainable Development Goal 1.1 (SDG1.1). SDG1.1 aims to “eradicate extreme poverty” by 2030, as defined by the World Bank’s international poverty line of $1.90 a day line. ($1.90 is an update to 2011 prices of the $1.25 a day line in 2005 prices, which is explained in this paper, “Dollar-a-Day Revisited”.
What does the new data suggest about progress toward SDG1.1?
The following Figure plots the series from PovcalNet for the overall poverty rate for the developing world over the period 1981-2015. This looks very encouraging. Of course, there will be less progress at higher lines than the (deliberately frugal) $1.90 line. But the rate of decline we are seeing for extreme poverty is clearly good news. The poverty rate is falling by a little over 1% point per year, on average, over the period as a whole. (The regression coefficient on time is -0.012, with a standard error of 0.0004, though this only reflects the time series variation.)
A simple linear extrapolation of this series indicates that extreme poverty will be eliminated by 2025. (A crude calculation of the standard error, again based solely on the time series, gives a value of 0.9 years, implying a 95% confidence interval is 2023-2027.)
However, if we dig a bit deeper there is another perspective on the data that is far less encouraging. Let us ask instead how long it will take for the “floor” of the distribution of consumption in the developing world to reach $1.90 a day. This is another way of defining “eradicating extreme poverty,” namely that the poorest person has $1.90 a day or more. The floor is not easily estimated, but I have outlined an approach in another paper, “Are the World’s Poorest Being Left Behind?.” The following Figure gives my estimates of the floor over the same period. This is a weighted mean of the consumption levels of the poor, with highest weight on the poorest, and linearly declining weight as consumption rises, until $1.90 is reached.
This perspective is not nearly as encouraging. The floor in 2015 is almost exactly $1.00 a day, up from $0.87 a day in 1981. There is a (statistically significant) positive slope over time to how the floor has evolved, but the slope is very small. At this rate of progress, extreme poverty will not be eliminated until 2278 (with a 95% confidence interval of 2169 to 2387). From this perspective we are way off target.
The reason is clear: the developing world is not making enough progress in reaching the poorest—well below the $1.90 line. Numbers of poor (by this frugal standard) are falling, which is undeniably good news. But the progress is not being shared enough by the developing world’s poorest. They are not exactly being “left behind” but pretty close to it.
The prospect of a much slower progress in lifting the last few % out of poverty should not be too surprising. In 2012, the President of the World Bank, Jim Yong Kim, asked me to propose a goal for poverty reduction (at a time when I worked for the World Bank, as Director of its research department). An elaboration of the note I wrote for him was subsequently published as, “How Long will it Take to Lift One Billion People out of Poverty?” That paper outlined both pessimistic and optimistic paths to lifting one billion people out of extreme poverty, and the optimistic path evolved into SDG1.1. But an important difference crept in along the way. My “optimistic path” would still leave a few % of the world’s population in poverty by 2025-30. My calculations suggested that the last few % would be a much harder job. Even my optimistic path for economic growth and income inequality would not “eradicate extreme poverty.”
The good news from the latest PovcalNet is that we are making progress in reducing numbers of poor. But a closer look at the new data suggests that “business as usual” will not achieve SDG1.1, which might well take another 200 years!
Greater effort at reaching the poorest will almost certainly be needed.