Historically, especially in Latin America, more effort has gone into assessing the extent of “income poverty”— whether individuals possess sufficient income to live a minimally adequate life—than into determining the extent of non-income deprivations such as access to water and sanitation, adequate educational opportunities and basic health care. Thanks to the rising influence of the “human development” perspective that emphasizes non-income achievements, greater attention has been given in recent years to such factors as health status, education, quality of shelter, and access to clean water. However, whether or not people have adequate resources to achieve basic requirements continues to be a crucial factor in determining whether a person is poor. It is hard to imagine a practical approach to poverty assessment that could do without it altogether.
The World Bank’s Money-Metric Approach
The most influential approach to income poverty assessment in the regional and global context is the “money metric” approach used by the World Bank. This approach, which employs the “one dollar per day” and the “two dollars per day” international poverty lines, converts these poverty lines into local currencies using “purchasing power parity” conversion factors. It then uses national household surveys to identify in each country the number of persons whose local income is lower than the national poverty lines that have been deemed equivalent to the international poverty lines.
The World Bank’s estimates suggest there have been modest reductions in the proportion of Latin Americans living in poverty, while the absolute numbers have increased. The proportion of the population in Latin America and the Caribbean estimated to live beneath the $1 per day poverty line in 2004, the latest year for which estimates were produced, was 8.64 percent (only slightly lower than its estimated 1981 level of 10.77 percent). The proportion estimated to live beneath the $2 per day poverty line was 22.17 percent (somewhat lower than its estimated 1981 level of 28.45 percent). Nevertheless, according to the World Bank estimates, the absolute number of people estimated to be living in poverty in the region actually increased between 1981 and 2004 for both the $1 per day and the $2 per day poverty lines—from 39 million to 45 million, and from 104 million to 121 million, respectively. These figures compare unfavorably to the estimated rate of reduction of the proportion of poor persons in the world population as a whole, which dropped from 40.14 percent in 1981 to 18.09 percent in 2004 for the $1 per day poverty line, and from 66.96 percent in 1981 to 47.55 percent in 2004 for the $2 per day line…
