Household data is logistical problem in Nigeria © OneWorld TV

Most developing countries determine their national poverty line as the value of a basket of basic food and essential non-food items. Some governments work with separate urban and rural poverty lines, recognising that costs are higher in cities. The food poverty line is the most stringent measure, reducing the basket to food items only.

The time lag in global poverty statistics stems partly from the prohibitive cost, skills and logistics involved in conducting household income and expenditure surveys in the developing world. Delays may be aggravated through controversy over the basis of calculating poverty, often inevitable where it dictates the distribution of aid or social welfare. Household surveys analyse consumption as well as income, recognising that goods may be exchanged by barter and that many families grow their own food.

Analysis of data includes the incidence of households whose income is just above or below the poverty line. A high incidence means that a small change in economic fortune or in redistribution can make a large impact on poverty figures. A useful indicator is the “poverty gap” which averages the shortfall of income for all those below the poverty line, expressed as a percentage of the poverty line.

Most poor countries take a very narrow view of what constitutes “essential” non-food items to include in the basket. This approach attracts criticism for ignoring other important dimensions of poverty such as limited access to education, health, water and housing. The UN strives to be more inclusive in its Human Poverty Index which measures progress in each country by reference to life expectancy and education as well as standard of living.

Richer countries are more likely to reflect this broader perspective in defining poverty lines. Many also address inequality by measuring poverty in relative terms. For example, in the UK, the poverty line is 60% of median income; by definition, poverty on this basis cannot be eradicated.

Confusion over India's poverty line © Changemakers.net

As each national poverty line reflects a different view of essential food and goods, an alternative method is needed to aggregate global poverty on a consistent basis. The World Bank calculates an international poverty line by reference to the average of the national poverty lines in 15 of the world’s poorest countries. This exercise was last completed using 2005 data, resulting in an international poverty line of $1.25 per day. The figure of $1 a day which is often quoted relates to an earlier assessment based on 1985 data.

Global poverty is then assessed by reference to “data from 675 household surveys across 116 developing countries”, according to the World Bank. This data is compared to the $1.25 benchmark, not by standard currency exchange rates, but by purchasing power parity (PPP) rates which smooth out the different buying power of the dollar in each country.

The World Bank figure of $1.25 per day was intended to be a bottom marker. Unfortunately, the two countries with the largest populations in the world, India and China, have both defined national poverty lines which are even lower. India’s poverty line is $1.02 which gives a rate of 26%, compared to 42% on the international basis. In China the gap is even wider, tripling its national poverty numbers to over 200 million. These inconsistent measures are the source of much confusion.

A second tier international poverty line of $2 per day is derived from the average of national poverty lines in all lower and middle income countries. The Bank reports that 2.6 billion people live below this benchmark, a figure which has changed little since 1981. Indeed a slightly higher figure of $2.50 per day captures more than half of the world’s population. The World Bank is due to review these various poverty benchmarks in 2011.

Infrequent adjustments to the international poverty line create further confusion because of the resulting sharp movement in the extent of global poverty. The new figure of 1.4 billion for 2005 was a 40% increase over the 2004 assessment. However, the Bank reconfigures historic poverty data with the new benchmark so that the pattern of change, both globally and nationally remains broadly consistent.

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