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Nearly Half the World Lives on Less than $5.50 a Day

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Economic advances around the world mean that while fewer people live in extreme poverty, almost half the world’s population — 3.4 billion people — still struggles to meet basic needs, the World Bank said.

Living on less than $3.20 per day reflects poverty lines in lower-middle-income countries, while $5.50 a day reflects standards in upper-middle-income countries, the World Bank said in its biennial Poverty and Shared Prosperity Report, “Piecing Together the Poverty Puzzle.”

The World Bank remains committed to achieving the goal of ending extreme poverty, defined as living on less than $1.90 a day, by 2030. The share of the world’s population living in extreme poverty fell to 10 percent in 2015, but the pace of extreme poverty reduction has slowed, the Bank warned on Sept. 19.

However, given that economic growth means that a much greater proportion of the world’s poor now live in wealthier countries, additional poverty lines and a broader understanding of poverty are crucial to fully fighting it, the report says.

“Ending extreme poverty by 2030 and boosting shared prosperity are our goals, and we remain committed to them,” said World Bank Group President Jim Yong Kim. “At the same time, we can take a broader view of poverty at different levels and dimensions around the world. This view reveals that poverty is more widespread and entrenched, underlining the importance of investing in people.”

While rates of extreme poverty have declined substantially, falling from 36 percent in 1990, the report’s expanded examination of the nature of poverty demonstrates the magnitude of the challenge in eradicating it. Over 1.9 billion people, or 26.2 percent of the world’s population, were living on less than $3.20 per day in 2015. Close to 46 percent of the world’s population was living on less than $5.50 a day.

The report also goes beyond monetary measures of poverty to understand how access to adequate water and sanitation, education, or electricity affect a family’s well-being. And since the burdens of poverty often fall most heavily on women and children, the report analyzes how poverty can vary within a household.

The report finds that the incomes of the poorest 40 percent grew in 70 of the 91 economies monitored. In more than half of the economies, their incomes grew faster than the average, meaning they were getting a bigger share of the economic pie. However, progress in sharing prosperity lagged in some regions of the world. The report also warns that data needed to assess shared prosperity is weakest in the very countries that most need it to improve. Only one in four low-income countries and four of the 35 recognized fragile and conflict-affected states have data on shared prosperity data over time.

The new measures allow the World Bank to better monitor poverty in all countries, in multiple aspects of life, and for all individuals in every household.

REGIONAL SNAPSHOTS

East Asia and Pacific: The region was one of the best performers in shared prosperity: The incomes of the poorest 40 percent of the population grew on average 4.7 percent between 2010 and 2015. East Asia not only had the largest reductions in extreme poverty, but also in the proportion of people living on less than $3.20 and $5.50 per day. While extreme poverty is very low, the region saw a higher percentage of people lacking access to sanitation.

Europe and Central Asia: Many countries in the region suffered setbacks in the growth of incomes of its bottom 40. On the other hand, several economies whose bottom 40 suffered large declines because of the financial and the debt crises were recovering. Among developing regions, Europe and Central Asia had the lowest percentage of people living under the $3.20 and $5.50 poverty lines. However, in the share of people lacking schooling enrollment, it performs less well than either East Asia and Pacific or Latin America and the Caribbean.

Latin America and the Caribbean: The region saw less shared prosperity from 2010 to 2015 than in previous years as its economies were impacted by a slowdown in global commodity prices. The region had almost 11 percent living on less than $3.20 a day and over 26 percent on less than $5.50 a day in 2015. Poverty in non-monetary dimensions such as lack of access to drinking water, adequate sanitation or electricity was much less associated with monetary aspects.

Middle East and North Africa: Even though the region saw an increase in the number of people living on less than $1.90 a day, levels of extreme poverty remained low. However, the region had more people living on less than $5.50 per day in 2015 than in 1990. Additionally, almost one in seven people lacks adequate sanitation.

South Asia: the region saw impressive growth of the incomes of its bottom 40 between 2010 and 2015. Despite a 35-percentage point decline in extreme poverty between 1990 and 2015, the region registered only an 8 percent decrease in people living on less than $3.20 a day, and over 80 percent of the region still lived below $5.50 per day in 2015. Also, the number of people in the region living in households without access to electricity or adequate sanitation was far greater than those living in monetary poverty.

Sub-Saharan Africa: A third of the countries in the region experienced negative income growth for the bottom 40 percent of their populations. The region with the largest number of extreme poor, Africa saw its population nearly double between 1990 and 2015, with one of the largest increases in population being for those living on less than $3.20 and more than $1.90. The poor suffered from multiple deprivations such as low consumption levels and lack of access to education and basic infrastructure services.

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Action on Trade is Necessary for Businesses to Unlock Net Zero Targets

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For businesses to reach their emission targets, the global trading system needs to adapt, and businesses are calling for the change.

These are the main findings of the Delivering a Climate Trade Agenda: Industry Insights Report released today by the World Economic Forum, in collaboration with Clifford Chance.

The six-month study is based on research and interviews with global companies, across sectors including transport, energy, manufacturing, and consumer goods. The objective of the research process was to identify necessary changes to the current global trade system and how to better incentivize and accelerate decarbonization. The resulting study outlines eight key actions that, if taken by governments and businesses, could make global trade a better enabler of climate action.

Sean Doherty, Head of International Trade and Investment said: “Traditionally, trade and climate policy-making has happened in separate silos. The urgency of the climate crisis calls for us to break down these silos through public-private cooperation in order to accelerate emissions reductions while achieving prosperity for all. The good news for policy makers is businesses are ready and willing to support this change.”

Jessica Gladstone, Partner at Clifford Chance said: “International trade will play a key role in achieving a just transition to a low-carbon sustainable global economy. Businesses stand ready to lead in this transition, but governments can support by ensuring the right legislative and regulatory structures are in place. Our report explores global and domestic policy actions that can create climate-friendly trade that is fair, transparent, and has technology and innovation at its core.”

Interviews revealed the following ways for trade to support businesses to decarbonize and grow sustainably:

  • Tariff reductions on key goods
  • Addressing non-tariff distortions in parallel
  • Phasing out fossil fuel subsidies
  • Building coherence around carbon-based trade policies
  • Supporting trade in digital and climate-related services
  • Encouraging climate-smart agriculture
  • Aligning trade agreements with climate commitments
  • Facilitating green investment

The chart below provides examples of how the global trading system can through continued dialogue between governments and the private sector put trade to the service of climate action.

The report includes a jointly-authored foreword by the World Trade Organization (WTO) Director General Ngozi Okonjo-Iweala and the United Nations Framework Convention on Climate Change (UNFCCC) Executive Secretary welcoming the insights from business. Major intergovernmental meetings will be held under both organisations in the last quarter of this year.

Business can take steps to encourage alignment of trade rules with climate action. The Forum is today launching a two-year work programme – titled Climate Trade Zero – to support public and private exchange on these issues as part of building a more sustainable trading system.

Many companies also recognized that the transition is taking place at different speeds and levels of intensity across countries and sectors. Interviewees highlighted the importance of providing support and incentives to developing countries, and to supply chain partners in developing countries, to undertake the investments necessary to reduce their emissions.

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Appliance standards and labelling is highly effective at reducing energy use

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Policies that introduce minimum efficiency performance standards and energy-consumption labelling on appliances and equipment have led to reduced power consumption, lower carbon emissions, and cost savings for consumers, according to analysis published today by the IEA and the 4E Technology Collaboration Programme (4E TCP).

The report’s findings are drawn from nearly 400 evaluation studies covering 100 countries, including those with the longest running and strongest appliance policies, such as China, European Union, Japan and the United States.

“The findings from the study are important as they provide evidence that standards and labelling are highly effective policy instruments that bring benefits to consumers as well as lower emissions and lower energy demand,” said Brian Motherway, the Head of Energy Efficiency at the IEA.

The study shows the policies have had significant positive impacts:

  • In countries with long-running policies, appliances are now typically consuming 30% less energy than they would have done otherwise.
  • In the nine countries/regions for which data were available, such programmes reduced annual electricity consumption by a total of around 1 580 terawatt-hours in 2018 – similar to the total electricity generation of wind and solar energy in those countries.
  • The programmes that have been operating the longest, such as those in the United States and the European Union, are estimated to deliver annual reductions of around 15% of their current total national electricity consumption. This percentage increases each year as more of the older, less-efficient stock is replaced with equipment that meets new higher efficiency standards.
  • These energy savings represent a significant financial boon for businesses and householders. In the United States alone, utility customers are now economising USD 60 billion each year, or USD 320 per customer.
  • Also, the United States, European Union and China together are avoiding annual CO2 emissions of more than 700 million tonnes, equivalent to the total energy-related emissions of Germany.
  • Well-designed policies encourage product innovation and lead to economies of scale, which reduces the cost of appliances even without accounting for the efficiency gains. For example, in Australia the sticker price of appliances has typically fallen 40% over the last 20 years, while average energy consumption has fallen by a third.

“The message is simple: expanding standards and energy efficiency labelling programmes makes the energy transition challenge easier, more affordable and become a reality,” said Jamie Hulan, the Chair of the 4E TCP.

The IEA will continue to collaborate with 4E TCP to enhance and promote the use of such policies. 4E TCP is an international platform for fourteen countries and the European Union to exchange technical and policy information focused on increasing the production and trade in efficient end-use equipment.

Ahead of this November’s COP26 Climate Change Conference, the IEA is working with the UK Government via the Super-Efficient Equipment and Appliance Deployment (SEAD) initiative to coordinate and improve international action on product energy efficiency. The United Kingdom is leading the COP26 Product Efficiency Call to Action, which aims to double the efficiency of key global products by 2030, initially focusing on four key energy-consuming products: air conditioners, refrigerators, lighting and industrial motors systems. The IEA is supporting the implementation of this work and helping expand the number of countries ready to make this commitment.

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Global economy projected to show fastest growth in 50 years

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The global economy is expected to bounce back this year with growth of 5.3 per cent, the fastest in nearly five decades, according to the UN Conference on Trade and Development (UNCTAD).

In its new report released on Wednesday, the agency said that the rebound was highly uneven along regional, sectoral and income lines, however.  

During 2022, UNCTAD expects global growth to slow to 3.6 per cent, leaving world income levels trailing some 3.7 per cent below the pre-pandemic trend line. 

The report also warns that growth deceleration could be bigger than expected, if policymakers lose their nerve or answer what it regards as misguided calls for a return to deregulation and austerity. 

Differences in growth 

The report says that, while the response saw an end to public spending constraints in many developed countries, international rules and practices have locked developing countries into pre-pandemic responses, and a semi-permanent state of economic stress. 

Many countries in the South have been hit much harder than during the global financial crisis. With a heavy debt burden, they also have less room for maneuvering their way out through public spending. 

Lack of monetary autonomy and access to vaccines are also holding many developing economies back, widening the gulf with advanced economies and threatening to usher in another “lost decade”. 

“These widening gaps, both domestic and international, are a reminder that underlying conditions, if left in place, will make resilience and growth luxuries enjoyed by fewer and fewer privileged people,” said Rebeca Grynspan, the secretary-general of UNCTAD. 

“Without bolder policies that reflect reinvigorated multilateralism, the post-pandemic recovery will lack equity, and fail to meet the challenges of our time.” 

Lessons of the pandemic 

UNCTAD includes several proposals in the report that are drawn from the lessons of the pandemic. 

They include concerted debt relief and even cancellation in some cases, a reassessment of fiscal policy, greater policy coordination and strong support for developing countries in vaccine deployment. 

Even without significant setbacks, global output will only resume its 2016-19 trend by 2030. But even before COVID-19, the income growth trend was unsatisfactory, says UNCTAD. Average annual global growth in the decade after the global financial crisis was the slowest since 1945. 

Despite a decade of massive monetary injections from leading central banks, since the 2008-9 crash, inflation targets have been missed. Even with the current strong recovery in advanced economies, there is no sign of a sustained rise in prices. 

After decades of a declining wage share, real wages in advanced countries need to rise well above productivity for a long time before a better balance between wages and profits is achieved again, according to the trade and development body’s analysis. 

Food prices and global trade 

Despite current trends on inflation, UNCTAD believes the rise in food prices could pose a serious threat to vulnerable populations in the South, already financially weakened by the health crisis. 

Globally, international trade in goods and services has recovered, after a drop of 5.6 per cent in 2020. The downturn proved less severe than had been anticipated, as trade flows in the latter part of 2020 rebounded almost as strongly as they had fallen earlier. 

The report’s modelling projections point to real growth of global trade in goods and services of 9.5 per cent in 2021. Still, the consequences of the crisis will continue to weigh on the trade performance in the years ahead. 

For director of UNCTAD’s globalization and development strategies division, Richard Kozul-Wright, “the pandemic has created an opportunity to rethink the core principles of international economic governance, a chance that was missed after the global financial crisis.” 

“In less than a year, wide-ranging US policy initiatives in the United States have begun to effect concrete change in the case of infrastructure spending and expanded social protection, financed through more progressive taxation. The next logical step is to take this approach to the multilateral level.” 

The report highlights a “possibility of a renewal of multilateralism”, pointing to the United States support of a new special drawing rights (SDR) allocation, global minimum corporate taxation, and a waiver of vaccine-related intellectual property rights.  

UNCTAD warns, though, that these proposals “will need much stronger backing from other advanced economies and the inclusion of developing country voices if the world is to tackle the excesses of hyperglobalization and the deepening environmental crisis in a timely manner.” 

For the UN agency, the biggest risk for the global economy is that “a rebound in the North will divert attention from long-needed reforms without which developing countries will remain in a weak and vulnerable position.”

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