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Poverty & Inequality

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How Poor is 'Poor'?
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Poverty is usually defined by the ‘$1-a-day’ line developed by the World Bank. But does this definition tell the whole story? We need a broader approach, based on human rights, which takes into account actual living standards, argues a report by the New Economics Foundation.

Link to the report: How poor is 'poor'? Towards a rights-based poverty line


6th July 2010 - Published by the New Economics Foundation

The 'dollar-a-day' definition of poverty has been widely adopted by the international community. But this definiton focuses exclusively on one aspect of poverty, namely income, to the exclusion of other critical aspects of deprivation, such as assets, access to essential services, and social exclusion. Even in the context of income, it sets the poverty line at an essentially arbitrary level. It also gives rise to a number of serious technical problems in the measurement of poverty, comparisons between countries, and analysis of changes in poverty over time.

Still more importantly, setting a poverty line as a basis for policy and the measurement of progress represents an implicit moral judgment. By defining poverty as the proportion of the world’s population below a particular level of income, we are effectively saying that it is morally acceptable for people to live at, or just above, this level of income, so long as they do not live below it. The $1-a-day line, however, is not based on any such judgment or analysis, and in most developing countries living standards at this level of income are below anything that could reasonably be regarded as acceptable.

This paper summarises the fundamental problems with the $1-a-day approach, and what they mean for what we think we know about poverty. It goes on to review other alternatives, to assess whether they provide a more viable alternative. Finally, it proposes a new approach – a rights-based poverty line (RBPL), based on the level of income at which living standards consistent with economic and social rights are actually achieved in each country – which, we argue, resolves the problems inherent in the definition of poverty more satisfactorily than the other alternatives.

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