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Is poverty really declining again? What falling poverty doesn’t tell us

After a temporary increase in 2020 due to COVID-19, global extreme income poverty is reportedly falling again, according to World Bank estimates. However, undernourishment is rising, and the number of people in need of humanitarian aid has nearly quadrupled since 2015. How is this seemingly contradictory picture to be understood? And what does it mean for donor policies?

Figure 1: Global extreme income poverty, undernourishment, and humanitarian needs

Figure 1 illustrates trends for three indicators which highlight different dimensions of global poverty. As shown, extreme income poverty is declining—except for the COVID-year 2020—while undernourishment and humanitarian needs are on the rise. The picture appears somewhat contradictory; one would expect some correlation between these indicators.

Three key indicators

The World Bank estimate of global extreme Income poverty (below USD 2.15 per day) is the first indicator under SDG 1, No Poverty. The underlying data comes from national household surveys. As many countries lack recent surveys the World Bank relies on extrapolations based on assumed GDP growth and income distribution. In some cases, where even this data is unavailable, trends in neighbouring countries are used (see World Bank Poverty and Inequality Platform Methodology Handbook). In the long term, there has been a dramatic decline in extreme income poverty, from 29% of the world’s population in 2000 to 8.5% today (equivalent to about 700 million people). 

FAO’s indicator of global undernourishment¹—also an SDG indicator under SDG 2, Zero Hunger—has grown since 2018 and in 2023 it exceeded extreme income poverty for the first time. It is a model estimate based on income trends, income inequality, food prices and crop yields. 

The global humanitarian needs are reported annually by UNOCHA in its Global Humanitarian Overview. Needs are defined here as the lack of the most basic access to food, health care, water, education, housing, and protection. The methodology for estimating ‘People in Need’ has been refined over time and is increasingly based on multisectoral surveys (UNOCHA-JIAF, Joint Intersectoral Analysis Framework). Unlike the other two indicators, this estimate does not rely on extrapolations and model assumptions but rather on directly collected data in identified crisis areas. 

Since 2015, people in need of humanitarian support have nearly quadrupled, now corresponding to almost half the number of people living in extreme income poverty. The increase in armed conflicts and climate-related extreme weather are among the main causes, with approximately 90% of humanitarian needs concentrated in just about twenty countries and their refugee-hosting neighbours (see Table 1 below).

Why this contradictory picture?

How can three indicators expected to be closely related move in such different directions? Although the indicators are supposed to measure different things, it can be assumed that a significant portion of the undernourished and those in humanitarian need are also income poor.

The most plausible explanation is that the World Bank’s extrapolation model for estimating global income poverty simply ‘misses’ significant population groups. The World Bank has already noted the problem with the rising numbers of external refugees (approximately 40 million often excluded from both home and host country statistics) and with internally displaced persons (approximately 80 million people, often hard to capture in income poverty statistics).² 

An even larger issue is probably the lack of data on income poverty in countries where humanitarian needs are greatest. Table 1 below shows the latest estimates of global humanitarian needs, ranked by the year of the last household survey registered by the World Bank. Only about a third of humanitarian needs are in countries with a survey conducted in 2020 or later. Half of humanitarian needs are in countries where household surveys were conducted before 2016 or are entirely absent, or in refugee-hosting neighbouring countries.

Today, as poverty increasingly concentrates in countries with volatile economies, armed conflicts, marginalized population groups and poor data quality, it has become more challenging to estimate global poverty trends using the traditional extrapolation techniques. FAO’s estimate of undernourishment, which also includes factors such as food prices and smallholder farmers’ crop yields, is likely a more accurate instrument for capturing marginalized population groups in these areas.

Conclusions

The current model for estimating global income poverty is increasingly ineffective as poverty becomes more concentrated in data-scarce and volatile contexts. Until methodologies are improved, claims that global poverty reduction has resumed should be met with caution. 

The nature of poverty is changing, increasingly volatile, and increasingly driven by conflicts and climate (see for example). For donors with poverty reduction as a primary goal two messages emerge:

• Donor policies need to safeguard a generous and principled humanitarian aid, with a needs-based allocation model grounded in humanitarian principles. Principled humanitarian aid is the instrument to ensure that the most marginalized and vulnerable are not forgotten when hit by a crisis. Given the present state of the world this is easy to justify, but still not fully adhered to in global humanitarian allocations.
• Donor policies need to increase ambition levels for conflict prevention, peacebuilding, climate adaptation, and disaster prevention. These areas are key to reducing humanitarian needs. They should be prioritized for policy and methodological development. Regarding conflict prevention and peacebuilding in fragile states, this is unfortunately an area which has recently suffered a declining share of ODA.. Given the state of the world, this ongoing de-prioritization is hard to justify.

Göran Holmqvist is a Project Researcher with the Institute for Futures Studies and the former director of Sida’s Department for Asia, Middle East, and Humanitarian Assistance.

The views expressed in this piece are those of the author(s), and do not necessarily reflect the views of the Institute or the United Nations University, nor the programme/project donors.

Table 1:

Footnotes

¹The SDG indicator is defined as ‘the proportion of the population whose habitual food consumption is insufficient to provide the dietary energy levels that are required to maintain a normal active and healthy life’.

²‘For refugees, their number vanishes from poverty statistics of their own country because they are no longer counted in the place of origin. Both IDPs and refugees are also not properly accounted for in the country in which they reside…Even if – as in some but not all countries – their locations are appropriately included in the sampling frame, they are unlikely to be sampled due to their small proportion relative to the population and high clustering in specific locations.” (Pape och Varme 2023, World Bank, p2)

References

Chandy L. (2023), Economic Development in an era of Climate Change, Carnegie Development for International Peace

Pape U. och P. Varme (2023), Measuring Poverty in Forced Displacement Contexts, Policy Research Working Paper 10302, World Bank