Wikipedia Deep Dive

Poverty threshold

13 min read

The Invisible Line That Separates Survival from Desperation

Here's a strange fact: the amount of money that makes you "poor" changes depending on where you're standing.

If you're in the United States and earn two dollars a day, you would be living in conditions that most Americans cannot even imagine. But that same two dollars a day puts you right at the official global poverty line set by the World Bank. Cross an invisible border, and your poverty status transforms.

The poverty threshold—sometimes called the poverty line or, more evocatively, the breadline—represents the minimum income considered adequate for survival in a particular place. It sounds simple enough. But behind this seemingly straightforward number lies one of the most contentious debates in economics: What does it actually mean to be poor?

How We Invented a Number for Human Misery

The idea of drawing a precise line between "poor" and "not poor" is surprisingly recent. At the turn of the twentieth century, a British businessman named Charles Booth became obsessed with mapping poverty in London. He walked the streets, interviewed families, and eventually popularized the concept of a poverty line. He set it at ten to twenty shillings per week—the amount he calculated a family of four or five people needed to simply survive.

Then came Seebohm Rowntree, a chocolate manufacturer's son who turned his analytical mind to human suffering. Rowntree took Booth's approach and made it more scientific. He consulted nutritionists to calculate the absolute minimum calories a person needed before they would start losing weight or falling ill. He priced out the cheapest foods that could provide those calories. He added the bare minimum for rent, fuel, and clothing.

The number he arrived at became his poverty line.

When Rowntree surveyed the city of York using this method, he found that nearly twenty-eight percent of the population lived below his threshold. This was devastating news for Victorian England, which had comforted itself with the belief that grinding poverty was a London problem—a consequence of the capital's unique vices and urban decay. Rowntree proved that poverty was everywhere.

He also made an important distinction that still resonates today. Some families were in what he called "primary poverty"—they simply didn't earn enough money to survive. Others lived in "secondary poverty"—they technically earned enough, but spent their money on things other than necessities. This distinction raises uncomfortable questions about judgment and choice that poverty researchers still grapple with more than a century later.

The American Approach: Multiply by Three

The modern American poverty threshold has an origin story that borders on arbitrary.

In the early nineteen sixties, a government economist named Mollie Orshansky needed a way to measure income inadequacy. She knew that the United States Department of Agriculture had calculated how much a family needed to spend on a minimally nutritious diet. She also knew, from old research, that the average American family spent about one-third of its income on food.

Her logic was elegant: take the cost of a bare-bones food budget and multiply by three. That gives you the minimum total income a family needs.

This formula, created as a rough estimate over sixty years ago, remains the foundation of America's official poverty measure. The numbers get adjusted each year for inflation, but the underlying methodology hasn't fundamentally changed since Lyndon Johnson was president.

Think about what's changed since then. Housing costs have exploded relative to food costs. Healthcare, which barely figured into family budgets in the nineteen sixties, now consumes enormous shares of income. Childcare has transformed from a rarity to a necessity for most families. Yet the formula stays the same: food times three.

The Two-Dollar Question

For measuring global poverty, the World Bank takes an even simpler approach. As of September 2022, the international poverty line sits at two dollars and fifteen cents per day.

Let that sink in. If you earn more than two dollars and fifteen cents today, you are not, by official global standards, living in extreme poverty.

This number attempts to capture absolute poverty—the absence of enough resources to secure the basic necessities of life. It's designed to represent the same purchasing power everywhere in the world, adjusted through something called purchasing power parity, or PPP. The idea is that two dollars and fifteen cents should buy roughly the same amount of basic survival goods whether you're in Bangladesh or Bolivia.

The World Bank actually uses three different lines now. The two-dollar-fifteen-cent threshold is for the poorest countries. Lower-middle income countries use a three-dollar-sixty-five-cent line. Upper-middle income countries use six dollars and eighty-five cents.

Critics argue these numbers are absurdly low. Peter Edward of Newcastle University calculated that the real poverty line should be closer to seven dollars and forty cents per day—more than three times the official figure. The difference isn't academic. At the official threshold, global poverty has declined dramatically over the past two centuries, from over eighty percent of humanity in 1800 to around ten percent by 2015. Raise the line to a more realistic level, and the picture looks considerably bleaker.

The Basket Problem

There's a fundamental challenge with any global poverty line: how do you compare prices across countries?

A haircut in Manhattan costs forty dollars. The same haircut in Mumbai might cost two. A kilogram of rice varies wildly in price depending on whether you're buying it in Tokyo or Tegucigalpa. So economists use purchasing power parity adjustments to try to make these comparisons meaningful.

But here's the catch. The "basket of goods" used to calculate purchasing power parity typically includes things like washing machines, air travel, and healthcare services. Poor people don't buy washing machines or plane tickets. They buy basic foodstuffs—rice, corn, beans, oil. The prices of these basic goods often move quite differently from the prices of middle-class consumer items.

The economist Robert Allen tried to solve this by creating standardized baskets of goods that actually represent what poor people buy. His baskets include a fixed caloric quantity of whatever the cheapest local grain happens to be—corn in one place, rice in another, oats in a third. This approach reveals that poverty comparisons across countries are far more complicated than a single number can capture.

What Do You Actually Need to Survive?

In 1976, the International Labour Organization's World Employment Conference attempted something ambitious: defining the absolute minimum resources necessary for long-term physical well-being. This became known as the basic needs approach.

The traditional list is almost poetic in its simplicity: food, shelter, clothing. But modern definitions have expanded considerably. A 1995 United Nations declaration defined absolute poverty as severe deprivation of basic human needs including food, safe drinking water, sanitation facilities, health, shelter, education, and information.

The researcher David Gordon went further, creating a detailed checklist. To not be in absolute poverty, you need:

Enough food to maintain a body mass index above sixteen (the threshold below which malnutrition becomes dangerous)
Safe drinking water from a source other than rivers or ponds, available within a fifteen-minute walk
Access to toilets or latrines in or near your home
The ability to receive treatment for serious illnesses and during pregnancy
Housing with no more than four people per room, and floors not made of bare dirt
Access to education or literacy
Access to information through newspapers, radio, television, computers, or telephones
Access to basic services like healthcare, education, and credit

Lacking any two items from this list constitutes absolute poverty by Gordon's definition.

Notice what's on this list: information. Access to news, to communication, to the wider world. This isn't about survival in the biological sense—you won't die from not having a radio. But it reflects an understanding that poverty isn't just about keeping a body alive. It's about being cut off from society itself.

The Problem with Basic Needs

Not everyone embraced the basic needs approach. Critics called it unscientific, overly focused on consumption, and potentially harmful to economic growth. Some worried it gave the impression that eliminating poverty was simple—just check the boxes—when the reality is vastly more complex.

The Nobel Prize-winning economist Amartya Sen offered a different framework. Instead of asking what people need to consume, he asked what people need to be able to do. His "capabilities approach" focuses on whether people have the freedom and ability to live the kind of life they have reason to value. Can they participate in community life? Can they appear in public without shame? Can they make meaningful choices about their future?

This shifts the conversation from material goods to human flourishing. You might have enough calories, but if you can't leave your house without being humiliated for your poverty, are you really not poor?

Poverty as Social Exclusion

This brings us to relative poverty—a concept that makes some economists deeply uncomfortable.

Relative poverty means having significantly less than the people around you. The European Union, the Organisation for Economic Co-operation and Development (the OECD), and UNICEF all use relative poverty measures. The most common threshold is sixty percent of a country's median income. Fall below that line, and you're considered poor—regardless of whether you can afford food and shelter.

Critics point out an awkward implication: if everyone's income doubled tomorrow, relative poverty wouldn't change at all. The poor would still be poor by this definition, even though they could now afford twice as much stuff. Isn't this just measuring inequality rather than poverty?

Defenders argue that this misses the point. Poverty in a wealthy society isn't primarily about biological survival. It's about being able to participate in social life. Can you afford the clothes that won't get your children mocked at school? Can you pay for the birthday party invitations that keep your kids from being excluded? Can you contribute to the office collection when a colleague retires?

Adam Smith understood this as far back as 1776. He argued that poverty means being unable to afford "not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without." In Smith's England, a linen shirt was such a necessity—not for warmth, but for dignity. No respectable laborer could appear in public without one.

The Moving Target

What counts as poverty keeps changing.

In 1964, Republicans on a joint economic committee in the United States Congress endorsed the concept of relative poverty with remarkable clarity: "No objective definition of poverty exists. The definition varies from place to place and time to time. In America as our standard of living rises, so does our idea of what is substandard."

Rose Friedman, the economist married to Milton Friedman, made a similar point in 1965. Someone labeled poor that year would likely have a higher standard of living than someone considered not poor in 1935. The goalposts move as society advances.

The British sociologist Peter Townsend captured this in his influential 1979 definition: people are poor when they "lack the resources to obtain the types of diet, participate in the activities and have the living conditions and amenities which are customary, or are at least widely encouraged or approved, in the societies to which they belong."

By this standard, poverty isn't about a fixed basket of goods. It's about falling behind your own society's standards of decency.

Beyond Survival: The Living Income

A newer concept tries to thread the needle between absolute and relative poverty. The "living income" represents what a household needs to afford a decent standard of living—not mere survival, but something approaching dignity.

The key word is "decent." A living income should cover food, water, housing, education, healthcare, transport, clothing, and provision for unexpected events. The goal isn't just keeping people alive. It's allowing them to thrive.

This concept emerged from the work of Richard and Martha Anker, who developed methods for calculating living wages around the world. Their approach acknowledges that what counts as decent varies dramatically by location and must be adjusted regularly for inflation and economic changes.

The living income framework is particularly important for understanding poverty in developed countries, where the biological definition of poverty captures almost no one. In a wealthy nation, poverty typically doesn't mean risk of starvation. It means living in substandard housing, struggling to pay bills, facing constant financial stress, and being excluded from the activities and opportunities that others take for granted.

Why the Line Matters

You might wonder why anyone cares about the exact placement of an arbitrary threshold. If poverty is a continuum—and it clearly is—why obsess over where to draw the line?

The answer is that the line determines policy. Government programs often use poverty thresholds to determine eligibility. Fall one dollar below the line, and you qualify for assistance. Earn one dollar above it, and you're on your own. The placement of that threshold affects millions of lives and billions of dollars in spending.

The line also shapes how we understand progress. If we set the bar at two dollars a day, we can celebrate dramatic reductions in global poverty over the past few decades. Set it at seven dollars a day, and the picture darkens considerably. Both views are accurate in their own way, but they lead to very different conclusions about what's working and what isn't.

Perhaps most importantly, the poverty line reflects what a society considers acceptable. A country that sets its threshold low is essentially saying that mere survival is good enough. A country that sets it higher is committing to something more ambitious—the idea that everyone deserves not just life, but a life worth living.

The Line Between Numbers and Lives

Behind every poverty statistic is a human being navigating the boundary between managing and not managing. The threshold attempts to capture something real—the point at which life becomes genuinely desperate—but it can never fully succeed.

A single mother working two jobs might technically earn above the poverty line while experiencing daily deprivation that the numbers fail to capture. A retiree might fall below the threshold on paper while drawing on savings and family support that keep him comfortable. The line is a useful fiction, a way of making the vast complexity of human circumstances legible to policy makers and statisticians.

What the poverty threshold ultimately reveals is not the precise boundary of human suffering, but rather the values of the society doing the measuring. How much do we believe everyone deserves? What level of deprivation do we consider unacceptable? Where do we draw the line between inevitable inequality and intolerable injustice?

These are not technical questions with technical answers. They are moral questions that we answer, whether we realize it or not, every time we decide what counts as poor.