Poverty is the condition of lacking enough money or resources to meet basic needs such as food, shelter, clothing, health care and education, or to live at a standard regarded as acceptable in one's own society. Economists, statisticians and governments measure it in several ways: absolute poverty uses a fixed threshold of purchasing power, relative poverty compares a household with the typical income in its country, and multidimensional measures look directly at deprivations in health, schooling and living conditions.
Poverty is related to, but different from, economic inequality: a country can have little poverty and high inequality, or the reverse. Reducing it is the first of the United Nations Sustainable Development Goals and the core mission of the World Bank Group.
Poverty in plain terms
Think of household life as a set of buckets that must be filled every month: food, rent, travel to work, school costs, medicine. A household is poor when its income cannot fill the buckets that matter most, so it has to choose which ones to leave empty. A family might skip meals to pay rent, or keep a child home from school to earn a little extra.
Measuring poverty means agreeing which buckets count and how full they must be. A global line asks whether a person can buy the bare minimum anywhere in the world. A national line asks whether a family can live a normal life in its own country, which costs more in rich countries than in poor ones.
How poverty is measured
- The international poverty line. In June 2025 the World Bank raised its international poverty line for extreme poverty from $2.15 to $3.00 a person a day, measured in 2021 purchasing power parity dollars. It also uses higher lines of $4.20 and $8.30 a day, typical of lower-middle and upper-middle-income countries. Under the new line, the World Bank estimated about 838 million people lived in extreme poverty in 2022, around 10.5% of the world's population.
- National absolute lines. Most countries set their own line based on the cost of a basic basket. The US Census Bureau's official poverty rate was 10.6% in 2024, or 35.9 million people, while its Supplemental Poverty Measure, which counts taxes, benefits and living costs, was 12.9%.
- Relative lines. The OECD often uses 50% of median household income, and the European Union's "at risk of poverty" rate uses 60% of the national median after social transfers.
- Multidimensional measures. The Global Multidimensional Poverty Index, published by the UN Development Programme and the Oxford Poverty and Human Development Initiative, counts deprivations in health, education and living standards. Its 2025 edition found about 1.1 billion people in acute multidimensional poverty across 109 countries, most of them in sub-Saharan Africa and South Asia.
Causes of poverty
Poverty has many interacting causes. At the national level, low productivity, weak institutions, conflict, poor infrastructure and dependence on a few commodities hold down average incomes, issues covered under developing countries and the middle-income trap. At the household level, low human capital, illness, disability, unemployment, large families and lack of land or savings all raise the risk. Work in the informal economy often pays little and offers no protection against shocks. Lack of access to bank accounts, credit and insurance, addressed by financial inclusion programmes, makes it harder to save, borrow for a business, or cope with a bad harvest. When these disadvantages reinforce one another, economists speak of a poverty trap.
Policies to reduce poverty
Over the long run, broad economic growth has been the main driver of falling poverty. China, India, Vietnam and Indonesia lifted hundreds of millions of people above the extreme line from the 1990s onward. Governments also use direct measures:
- Cash transfers. Transfer payments such as Brazil's Bolsa Família, Mexico's former Progresa/Oportunidades and Pakistan's Benazir Income Support Programme pay money to poor households, sometimes on condition that children attend school or clinics. Ideas such as universal basic income and the negative income tax go further.
- Social insurance and welfare. Pensions, unemployment insurance and disability benefits reduce poverty among people who cannot work.
- Public services. Free or subsidized schooling, health care and clean water, often provided by the public sector, raise living standards beyond what income figures show.
- Labor market measures. Minimum wages, job programmes and remittance-friendly policies support earnings; remittances are a major income source for poor households in countries such as Nepal, the Philippines and Pakistan.
Debates and limitations
There is no agreement on the "right" line. Some researchers argue that $3.00 a day is far too low to describe a decent life, and others argue that relative lines measure inequality rather than hardship, since everyone's income could double without the relative rate changing. Price data used for purchasing power parity are revised every few years, which can move global counts by tens of millions overnight, as the 2025 update did. Household surveys miss homeless people and may undercount income from the informal sector. There is also long-running debate between those who stress growth and markets and those who stress redistribution and public services, with most evidence suggesting both play a role.