A line that defines the poor

Relative Poverty: This measure sees poverty as dependent on social context. For example,relative poverty can be measured through social context,like income inequality. The main poverty line used in the OECD and European Union is a relative poverty measure based on economic distance,a level of income usually set at 60 per cent of the median household income. Income inequality for the world as a whole is diminishing,driven by the income growth rate in China.

POVERTY INDICATORS

Incidence of poverty (headcount index): This is the share of the population whose income or consumption is below the poverty line,that is,the share of the population that cannot afford to buy basic goods.

Depth of poverty (poverty gap): This provides information regarding how far off households are from the poverty line. This measure captures the mean aggregate income or consumption shortfall relative to the poverty line across the whole population.

Poverty severity (squared poverty gap): Accounts for the distance separating the poor from the poverty line,as well as inequality among the poor.

Incidence of poverty (headcount index): This is the share of the population whose income or consumption is below the poverty line,that is,the share of the population that cannot afford to buy basic goods.

Depth of poverty (poverty gap): This provides information regarding how far off households are from the poverty line. This measure captures the mean aggregate income or consumption shortfall relative to the poverty line across the whole population.

Poverty severity (squared poverty gap): Accounts for the distance separating the poor from the poverty line,as well as inequality among the poor.

TRACKING THE LINE

*Usually rich countries set their poverty lines in relative terms. It means that an increase in the income of the top rich results in more poverty if everything else remains the same. Also,a poverty line that is relative to the national average gives an idea of the inequality in society.

*The US,unlike other western countries,uses an absolute poverty measure. The poverty line there was created in 1963-64. Every year this calculation is adjusted for inflation.

*The World Bank defines poverty in absolute terms. It defines extreme poverty as those living on less than US $1.25 a day and moderate poverty as less than $2 a day. This is based on the purchasing power parity that compares the amount of currency needed to buy the same item in different countries.

*There are still 1.2 billion people living in extreme poverty.

*Proportion of the developing worlds population living in extreme poverty has fallen from 28 per cent in 1990 to 21 per cent in 2001. Much of the improvement in East and South Asia.

*Sub-Saharan Africa still accounts for more than one-third of the worlds extreme poor. There are more than twice as many extremely poor people in SSA (414 million) than there were 30 years ago (205 million).

*India contributes a third of the worlds poor,up from 22 per cent in 1981.

*China contributes 13 per cent of the worlds poor. However,between 1981 and 2010,it lifted 680 million out of poverty,more than the entire population of Latin America

Source: World Bank resource: The state of the poor: Where are the poor and where are the poorest? date: April 17,2013