TheStateofthePoor:WherearethePoorandwherearetheyPoorest?1 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 worlds 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 extremelyhighfigure,sothetaskaheadofusremainsherculean. To accelerate poverty reduction and end extreme poverty by 2030, we need to know who are the poor, wheredotheylive,andwherepovertyisdeepest. Howhavethedifferentregionsofthedevelopingworldperformedintermsofextremepovertyreduction? Extreme poverty headcount rates have fallen in every developing region in the last three decades. And both SubSaharan Africa (SSA) and Latin America and the Caribbean (LAC) seem to have turned a corner entering the new millennium.Aftersteadilyincreasingfrom51 percentin1981to58percentin1999, the extremepovertyratefell 10percentagepointsinSSAbetween1999and2010andisnowat48percent 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 2010andisnowat6percent. Fig1:TheEvolutionofExtremePovertyRatesbyRegion
90 84 80

ExtremePovertyRates(%)

70 60 60 61 60 51 50 48 46

66 62 58 57 51 48 44 43 34 26 21 1981 1990 1999 2010 52

40

36

35 33

30

20 12 10 2 2 0
China EAPwithout China Europeand CentralAsia LatinAmerica MiddleEast andthe andNorth Caribbean Africa India SouthAsia withoutIndia SubSaharan Africa Developing World

13

121212 4 1 6

10 6 5 2

Source:WorldBankstaffestimates.

Draft.PreparedbyPedroOlintoandHirokiUematsu,PovertyReductionandEquityDepartment

However, despite its falling poverty rates, SubSaharan 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 werethreedecadesago(205million). Fig2:NumberofExtremelyPoorIndividualsbyRegion(million)
2000 1800 1600 1400 1200 43 1000 800 600 197 400 200 0 1981
China MiddleEastandNorthAfrica

NumberofPoorbyRegion (million)
205 239 140 147 429 427 443 53 250 49 243 262 53 150 448 257 169 170 349 376 390 167 462 473 484 54 60 466 209 63 160 720 586 683 633 443 446 363 212 1984 1987 1990
India

290

330

147 156 395 399 414 132 126 107 445 400 48 120 37 111 173 2008

261

53 238

463

835

32 90 156 2010

1993

1996

1999

2002

2005

EAPwithoutChina

EuropeandCentralAsia SouthAsiawithoutIndia

LatinAmericaandtheCaribbean SubSaharanAfrica

Source:WorldBankstaffestimates.

As a result, while the extreme poor in SSA represented only 11 percent of the worlds total in 1981, they now account for more than a third of the worlds extreme poor (figure 3). India contributes another third (up from 22 percent in 1981) and China comes next contributing 13 percent (down from 43percentin1981).

Figure3.Regionalsharesoftheworldsextremepoorpopulation

RegionalShareofTheWorld'sExtremePoorPopulation(%)
100% 11 90% 7 80% 70% 60% 50% 40% 30% 20% 10% 0% 1981 1984 China LatinAmericaandtheCaribbean SouthAsiawithoutIndia 1987 1990 1993 1996 1999 2002 2005 2008 2010 43 39 22 13 8 15 8 15 17 20 22

24

28

31

34

9 10 8 10 9 24 27 27 30 3 12 3 12 3 12 4 10 3 9 26 26 22 15 13 13 3 9 34 34 33 10 9

23

25

23

2 3 13 13 15 3 3 13

3 7

33

36

33

EAPwithoutChina MiddleEastandNorthAfrica SubSaharanAfrica

EuropeandCentralAsia India

Source:WorldBankstaffestimates.

Howpooraretheextremelypoor?Havetheybecomepoorerinthelastthreedecades? Figure 4 plots the average daily per capita income of the extremely poor in the developing world as a whole, in the SubSaharan Africa region, and in the developing world excluding SubSaharan 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 SubSaharan Africa were not included, the average income of the worlds poor would haveconvergedevenfastertothe$1.25line(figure4). This increase in incomes of the extreme poor is unfortunately not seen in SubSaharan Africa. Between 1981 and 2010, the average income of the extremely poor has remained flat at approximately half of the$1.25lineinthatregion.

Figure4.Theevolutionoftheaveragepercapitaincomeoftheextremepoor

AveragepercapitaIncomeoftheExtremePoor
$1.25

$1.00
0.82 0.84 0.82 0.70 0.84 0.82 0.69 0.86 0.83 0.68

0.89 0.85 0.69

0.88 0.84 0.69

0.89 0.85 0.70

0.93

0.94

0.96

$0.75

0.74 0.74 0.72

0.87 0.71

0.87 0.71

0.87 0.71

0.80 0.70

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

SubSaharanAfrica DevelopingWorld DevelopmentWorldwithoutSubSaharanAfrica

Source:WorldBankstaffestimates.

Whereisextremepovertydeepestandthereforehardesttoend? Accelerating extreme poverty reduction is a huge challenge in both subSaharan 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$169billiondollarsin2005PPPdollars,orapproximately$197billionin2010. That is, if the incomes of every extremely poor person were to rise to the $1.25 line, the aggregate increaseintheirincomewouldneedtototalatleast$169billiondollarsin2005PPPterms.Wecallthis numbertheaggregateextremepovertygap.Thisrepresentsapproximately0.25percentofglobalGDP. 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 assistancerequiredtoclosethegap. Theaggregateglobal extremepovertygapin2010waslessthanhalfthegapin1981($362 billionin2005 PPPterms),afasterreductionthanthereductioninthenumberofpoor.