What Is the Poverty Gap?

The poverty gap is a ratio showing the average income shortfall of a total population from the poverty line. The poverty line is the minimum level of income required to secure the basic necessities for survival. As such, the poverty gap reflects the intensity of poverty in a nation. The poverty gap "is measured for the total population, as well as for people aged 18-65 years and people over 65," according to the OECD.

Understanding the Poverty Gap

The poverty gap is an indicator produced by the 澳洲幸运5官方开奖结果体彩网:World Bank Development Research Group. It measures poverty by looking at household 澳洲幸运5官方开奖结果体彩网:per capita income and consumption. The organization measures everyone against the same standard. As such, it sets an international 澳洲幸运5官方开奖结果体彩网:poverty line at periodic intervals, calculating the 澳洲幸运5官方开奖结果体彩网:cost of living at any given time by taking into account the going rate for basic food, clothing, and shelter around the world.

In 2017, the international extreme poverty line threshold was updated to $2.15 per day. Two new poverty lines were also introduced, a lower-middle-income threshold of $3.65 and an upper-middle-income poverty line of $6.85.

It is challenging to set a common international poverty threshold since different countries have different levels and interpretations of poverty. The World Bank’s poverty gap data for 2024 is available for 120 countries worldwide and is updated semi-annually in April and September.

U.S. Poverty Gap

The United States has its own poverty threshold that varies depending on the state. It also ♛varies based on the number of people per household.

As of 2024, the average threshold for a family of four stood at $31,200. This means that a married couple with two children and an annual household income of $25,000 is living below the poverty line. The poverty gap in this example is 🐎$6,200.

^{*For households with more than 8 persons, add $5,380 for each additional person.}

In 2022, the U.S. Census Bureau reported that the official poverty rate was 11.5% with 37.9 million people living in poverty.

Poverty Gap Index

The poverty gap statistic is most valuable to economists and government officials for calculating the poverty gap index. The index, also produced by the World Bank, takes the mean shortfall from the poverty line and divides it by the value of the poverty line.

If you multiply a country's poverty gap index by both the poverty line and the total number of individuals in the country, you get the total amount of money needed to bring the poor in the population out of extreme poverty and up to the poverty line, assuming perfect targeting of transfers.

Example of the Poverty Gap Index

Suppose a country has 10 million citizens, a poverty line of $500 per year, and a poverty gap index of 5%. In such a case, an average increase of $25 per individual, per year, would eliminate extreme poverty. The $25 is 5% of the poverty line, and the total increase needed to eliminate poverty is $250 million—$𓃲25 multiplied by 10 million individuals.

The poverty gap index is additive. In other words, the index can be used as an aggregate poverty measure, as well as be broken down by various ꦇsub-groups of the population, such as region, employment sector, education level, gender, age, or ethnic group.

The Bottom Line

The poverty gap is the difference between a financial threshold that represents a poverty line and the actual income of those whose income is below that line. It is a measure of the severity of꧟ poverty. The greater the gap, the worse the poverty in which an individual or family lives.