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BRIEF October 7, 2020

Poverty and Shared Prosperity 2020: Reversals of Fortune – Frequently Asked Questions

How would you summarize the effects of COVID-19 (coronavirus) on poverty? 

We estimate that between 88 million and 115 million additional people will be pushed into extreme poverty in 2020, bringing the total to between 703 and 729 million living on less than $1.90 a day. The extreme poverty rate will be 9.1 to 9.4 percent, taking us back three years to 2017 levels. An additional increase of between 23 million and 35 million in 2021 could bring the total number of new poor to between 110 million and 150 million. 

How can anyone, anywhere live on $1.90 a day? Why set the bar so low? 

Also known as the extreme poverty line, the $1.90-a-day line is based on national poverty lines in 15 of the world’s poorest countries, reflecting the resources required to meet a person’s minimum nutritional, clothing, and shelter needs in those countries. The World Bank Group and the international community adhere to it to keep the most urgent focus on helping the world’s poorest citizens and to maintain a stable measure of global progress across countries.

While it is important to have a common extreme poverty measurement that can be compared internationally, there are other benchmarks. Countries have their own national poverty lines that consider the context and preferences of each society, and we work with countries to build their capacity to measure poverty accurately and consistently.

The World Bank Group tracks several other poverty lines, including $3.20 a day – corresponding to conditions in lower-middle-income countries – and $5.50 a day for upper-middle-income countries. We have also introduced a Multidimensional Poverty Measure, which includes access to education and basic utilities; and a Societal Poverty Line, based on the typical level of consumption or income in each country, which increases in value as a country grows richer. 

Tracking multiple poverty lines shows us that even as progress has been made in reducing extreme poverty, hundreds of millions of people continue to live in challenging circumstances and remain vulnerable to falling back into abject conditions. This is a human tragedy that COVID-19 is making worse. Extreme poverty is a global challenge we would like the International Poverty Line to continue to draw attention to, even as we acknowledge the significant progress in recent decades in reducing the number of people living below this line. 

Are the numbers in your report reliable?

The World Bank reports global poverty numbers making use of official government surveys produced all over the world. These surveys are produced with different methodologies, over different time frames and with different accessibility protocols. But all are certified as accurate by their governments.

Why don’t you have poverty estimates for India and South Asia? 

Reporting of poverty numbers is subject to a series of rules to avoid publishing numbers that are too old or not representative. In the case of India, the most recent household survey available is from 2011-12. This data is more than three years from 2017, the anchor reporting year for the 2020 global update, and hence does not meet the reporting requirements. A more recent household survey was collected in 2017-18, but the data are not accessible to the public.

Because India accounts for a large portion of the population in South Asia, the lack of data for India also means that we do not report exact estimates for the South Asia region. Instead, Poverty and Shared Prosperity 2020 reports a range of poverty estimates for both India and South Asia. These ranges are calculated using a variety of well-established technical methods regularly used in cases when survey data are not available. 

What are the differences between the impacts of COVID-19 on the urban and rural poor? Will the poor be predominantly urban in the future?

Many people pushed into poverty by the pandemic are likely to live in congested urban settings and to work in the sectors most affected by lockdowns and mobility restrictions. Informal workers, seasonal migrants, and refugees may not be covered by existing safety nets and relief measures; additional targeted measures may be needed. COVID-driven poverty is making inroads in populations that had been relatively spared (e.g., urban, small business owners).

This is not to say that rural areas will not be affected. Over time, these areas, which tend to be poorer to start with, probably will experience a deterioration in living conditions, including among the existing poor. As mobility restrictions increasingly affect farm and non-farm activities and access to markets in rural areas, the rural poor are likely to face important income losses. Many rural communities are also facing critical challenges as they integrate massive inflows of returning migrants in a context of limited access to food and supplies. Combined, these developments will contribute to both a deepening and a widening in rural poverty. 

What is your assessment of the goal to end extreme poverty by 2030?

Before the pandemic struck, the goal of ending extreme poverty by 2030 was already on a razor’s edge. With millions being pushed back into poverty by COVID-19 – and with climate change and conflict already hitting the poorest the hardest – ending poverty by 2030 is harder than ever. But that is no reason to concede defeat and stop trying. On the contrary, this new reality means that individual countries and the global community must work even harder and smarter to halt the pandemic and put countries back on a path to eliminating extreme poverty.  

Wasn’t the world already off track to end extreme poverty before COVID-19 hit?

The global poverty rate has declined dramatically in the past 30 years. Global extreme poverty fell by an average of 1 percentage point per year from 1990-2015. But from 2013-2015, the decline was only .6 percentage point, and from 2015-2017, it was .5 percentage point. Long-standing factors such as conflict and climate change have contributed to this slowdown. This alone would have made it hard to reach the 2030 target of 3 percent global extreme poverty. Now, with COVID-19, the quest to end poverty has suffered its worst setback in a generation. The convergence of COVID-19, conflict, and climate change is driving this reversal, forcing hundreds of millions into poverty, many from populations that had been relatively spared.

What about inequality? 

One of the World Bank Group’s goals is to boost shared prosperity – to increase the incomes of the bottom 40%.  A high level of shared prosperity is an important indicator of inclusion and well-being, and correlates with reductions in poverty and inequality.

According to the Poverty and Shared Prosperity Report 2020, out of 91 economies for which data was available for 2012-2017, 74 had positive shared prosperity, meaning that growth was inclusive and the incomes of the poorest 40 percent of the population increased. 53 had a positive shared prosperity premium, meaning that growth benefited the poorest more than the entire population. These measures for 68 economies can be compared with an estimate of shared prosperity for an earlier period (circa 2010–15), revealing a downward trend in shared prosperity in half the economies with available data.

The average global shared prosperity (growth in the incomes of the bottom 40 percent) was 2.3 percent for 2012-2017.

But the gains are uneven: Shared prosperity and shared prosperity premiums are lower in fragile and low-income economies than in middle-income economies. In fragile and conflict-affected situations, shared prosperity fell by 0.8 percent. In low-income economies, it grew only 0.2 percent.

The shared prosperity goal means that we work to increase the incomes and welfare of the less well-off wherever they are, in the poorest of nations or in thriving middle-income countries.

Without policy actions, the COVID-19 crisis, combined with the effects of conflict and climate change, may trigger cycles of higher income inequality, lower social mobility among the vulnerable, and lower resilience to future shocks.   

Does flood risk really correspond to climate change? What about drought? Food security? 

Flooding is only one of several types of climate risks, along with droughts, high temperatures, and other natural disasters such as cyclones. The focus on flooding in this report primarily reflects the fact that floods are one of the most common and severe hazards, especially in lower-income countries where infrastructure systems, including drainage and flood protection, tend to be least developed; and there is more local-level variability in the exposure to flooding, in comparison with subnational variation in temperature, which makes the joint exposure to flood risk and poverty at the subnational level more amenable to examination. 

The focus on flooding does, however, bring to the fore certain countries and regions while not capturing the full extent of disaster risks elsewhere. For instance, river and urban flood risks in countries such as Rwanda are high, whereas the risk of extreme heat (related to climate) is low. 

You talk about COVID-19, climate change, and conflict, but what about corruption? How much of poverty is exacerbated by the fact that money meant to help the poor ends up in the pockets of corrupt officials?

This report focuses on COVID-19, climate change, and conflict because they are the three main obstacles to poverty reduction.   

The World Bank has long acknowledged that corruption is one of the single largest impediments to development. Corruption has a disproportionate impact on the poor and most vulnerable, increasing costs and reducing access to services, including health, education, and justice. 

The World Bank works with the public and private sectors as well as civil society to support efforts to prevent corruption, improve remedies to address wrongdoing when it occurs, as well as work toward improving behaviors, norms, and standards needed to sustain anti-corruption efforts.

The World Bank Group recently released a major report titled “Enhancing Government Effectiveness and Transparency: The Fight Against Corruption.”