Poverty and Global Inequality

Introduction

Poverty and inequality are central challenges in global development and international political economy. Poverty concerns the deprivation of resources and essential opportunities needed for an acceptable standard of living. Inequality concerns how income, wealth, opportunities, services, and power are distributed among people or groups.

These concepts overlap but are not identical. A society can experience economic growth while poverty persists, and poverty can decline even when inequality remains high. Likewise, two countries with similar average incomes may have very different levels of deprivation and unequal access to public services.

Global poverty and inequality are influenced by historical patterns of development, employment, education, taxation, technology, conflict, climate-related risks, trade, financial systems, and domestic and international institutions.

Core Concepts

Poverty: A condition in which people lack sufficient resources or capabilities to meet essential needs and participate adequately in society.

Extreme poverty: A condition of severe deprivation measured against an established international or national threshold. The World Bank updated its international extreme poverty line to US$3.00 per person per day in 2025 purchasing-power-parity terms, replacing the previous US$2.15 line based on 2017 PPPs. The applicable line and reference prices must be specified when interpreting poverty statistics.

Absolute poverty: Poverty measured against a fixed threshold of minimum resources or needs, adjusted as appropriate for prices and measurement methods.

Relative poverty: Poverty defined in relation to the living standards or income distribution of a particular society.

Multidimensional poverty: Poverty involving overlapping deprivations in areas such as education, health, housing, sanitation, nutrition, and access to basic services.

Income poverty: Poverty assessed using income or consumption relative to a specified threshold.

Wealth inequality: Unequal distribution of accumulated assets, such as property, savings, shares, and other holdings, minus liabilities.

Income inequality: Unequal distribution of income among individuals or households.

Opportunity inequality: Unequal access to the conditions needed to succeed, such as quality education, healthcare, employment, credit, and legal protection.

Social exclusion: Processes that prevent individuals or groups from participating fully in economic, political, social, or cultural life.

Vulnerability: The risk of falling into poverty or experiencing greater deprivation because of economic shocks, illness, conflict, environmental hazards, or other adverse events.

Measuring Poverty

Poverty line: A monetary threshold used to distinguish people classified as poor from those above the threshold under a particular methodology.

International poverty line: A common threshold used for international comparisons, adjusted using purchasing-power-parity methods. It is not the same as every country’s national poverty line.

National poverty line: A threshold developed for a particular country, reflecting its chosen methodology and social or economic context.

Poverty headcount ratio: The percentage of the population living below a specified poverty line.

Poverty gap: A measure of how far the incomes or consumption of poor people fall below the poverty line, averaged over the population under a specified methodology.

Poverty severity: A measure that gives greater weight to deeper shortfalls below the poverty line.

Multidimensional Poverty Index (MPI): A measure of overlapping non-monetary deprivations. It identifies poverty through selected indicators and dimensions rather than income alone.

Purchasing Power Parity (PPP): A method used to compare purchasing power across countries by accounting for differences in prices. PPP-based international poverty estimates are intended to improve comparability, but they remain dependent on data quality and methodology.

Household survey: A survey collecting information about living conditions, income, consumption, employment, or other characteristics of households.

Data comparability: The degree to which statistics can be meaningfully compared across countries, populations, or periods.

Understanding Inequality

Gini index: A measure of income or consumption inequality. In the commonly used 0-to-100 representation, zero indicates perfect equality and 100 indicates maximum inequality. Some datasets express the index on a 0-to-1 scale instead.

Lorenz curve: A graph comparing the cumulative share of income or wealth received with the cumulative share of the population, ranked from poorest to richest.

Income distribution: The way income is divided among individuals or households.

Wealth concentration: The accumulation of a large share of total wealth in a relatively small portion of the population.

Top income share: The proportion of total income received by a specified high-income group, such as the richest 10 percent or 1 percent.

Bottom income share: The proportion of total income received by a specified low-income group.

Horizontal inequality: Inequality between socially distinct groups, such as ethnic, religious, regional, or other population groups.

Vertical inequality: Inequality among individuals or households ranked according to income, wealth, or another characteristic.

Intergenerational inequality: Differences in economic circumstances or opportunities across generations, including the effects of inherited wealth, education, and family background.

Intergenerational mobility: The extent to which a person’s socioeconomic position differs from that of their parents or earlier generations.

Causes of Poverty and Inequality

Unemployment: A situation in which people who are available for and seeking work cannot find employment under the relevant statistical definition.

Underemployment: A condition in which people have less work than they need or are employed below their skills or productive capacity.

Low productivity: Limited output relative to labour, capital, or other inputs, often restricting wages and economic growth.

Unequal access to education: Differences in access to educational opportunities, quality, resources, and learning outcomes.

Unequal access to healthcare: Differences in the availability, affordability, and quality of health services.

Regressive taxation: A tax arrangement in which the effective tax burden, relative to income, tends to fall more heavily on lower-income groups.

Progressive taxation: A tax arrangement in which the effective tax rate generally rises as taxable income increases.

Discrimination: Unfair treatment that limits opportunities or rights based on characteristics such as gender, ethnicity, disability, or other status.

Conflict-induced poverty: Deprivation caused or intensified by violence, displacement, damaged infrastructure, disrupted employment, and reduced access to services.

Climate vulnerability: Exposure to climate-related hazards combined with limited capacity to anticipate, withstand, and recover from their effects.

Digital divide: Unequal access to digital devices, connectivity, digital skills, and the benefits of digital services.

Poverty, Globalization and International Political Economy

Globalization: The increasing interconnectedness of economies and societies through trade, investment, technology, migration, and information flows.

Unequal exchange: A concept used in political economy to examine how international economic relationships may distribute benefits and costs unevenly between countries or groups.

Debt burden: The pressure that debt repayments and servicing costs place on households, businesses, or governments.

Debt distress: A situation in which a borrower faces serious difficulties meeting debt obligations without major adjustments or restructuring.

Labour-market segmentation: The division of employment into categories with different wages, protections, opportunities, and levels of security.

Informal employment: Work that lacks some protections or coverage associated with formal employment arrangements. Its characteristics differ across economies.

Remittances: Transfers of money by migrants or other individuals to people or households, often in their countries of origin.

Social protection: Policies such as pensions, unemployment support, cash transfers, disability assistance, and other programmes that reduce vulnerability and support living standards.

Redistribution: The reallocation of income or resources through taxes, transfers, public services, and other policy mechanisms.

Inclusive growth: Economic growth designed to expand productive opportunities and distribute benefits more broadly across society.

Addressing Poverty and Inequality

Targeted social assistance: Support directed toward individuals or households that meet specified eligibility criteria.

Universal public services: Services available to all members of a defined population, such as public education or basic healthcare, under applicable rules.

Conditional cash transfer: A cash benefit linked to specified conditions, often involving school attendance or health-related requirements.

Universal basic income: A proposed policy providing regular cash payments to individuals without means-testing, although designs and funding models vary.

Living wage: A wage intended to provide a worker and, under a stated methodology, their household with an adequate standard of living.

Progressive public finance: Taxation and spending arrangements intended to improve equity, finance public goods, and support vulnerable populations.

Land reform: Changes to land ownership, tenure, or access arrangements, often intended to address unequal distribution or improve agricultural productivity.

Financial inclusion: Access to useful and affordable financial products and services, including payments, savings, credit, and insurance.

Gender-responsive budgeting: Budgeting that examines how public revenue and expenditure affect women, men, and different population groups.

Poverty reduction strategy: A policy framework setting objectives, measures, and monitoring arrangements to reduce poverty.

Key Distinctions

Key Terms at a Glance

• Basic needs: Essential requirements for health, safety, and a minimum standard of living.
• Economic mobility: Movement between socioeconomic positions.
• Social safety net: Programmes that provide protection against poverty and shocks.
• Fiscal policy: Government decisions about taxation, spending, and borrowing.
• Income transfer: A payment or benefit that reallocates resources to recipients.
• Living standards: The material and social conditions in which people live.
• Food insecurity: Limited or uncertain access to sufficient, safe, and nutritious food.
• Housing insecurity: Unstable or inadequate access to safe and affordable housing.
• Resilience: The ability to withstand and recover from adverse events.
• Distributional impact: The way a policy or economic change affects different groups.

Related Glossaries

• 8.1 International Political Economy: Core Concepts
• 8.4 Foreign Investment, Aid and Development Finance
• 17.1 Development and Human Development
• 17.3 Global North and Global South
• 17.4 Sustainable Development and SDGs
• 17.5 International Aid and Development Cooperation
• 17.6 Debt, Development and Financial Dependency
• 17.7 Food, Health and Human Security

Conclusion

Poverty and inequality are related but distinct problems that require careful measurement and policy analysis. Monetary poverty lines help assess income or consumption deprivation, while multidimensional measures reveal disadvantages in health, education, and living standards. Inequality measures show how resources and opportunities are distributed. Effective responses combine productive employment, education, healthcare, fair institutions, appropriate taxation, social protection, and policies that expand opportunities for disadvantaged populations.