8

The $1.25 PPP/day standard (in 2005 dollars), as defined by the World Bank Wikipedia. To be more specific, let's pick the year 1932, which is roughly when the Great Depression was said to be at its worst. 0%? 5%? 10%?

Edit to clarify: A very common mistake (even here on History StackExchange) is to believe that the $1.25/day standard means having literally 1.25 US dollars and converting it at current exchange rates to the local currency. One then proceeds to claim that "Oh, prices of everything in these Less Developed Countries are so much lower, so this $1.25 can go much further there. This measure is therefore 'ludicrous'."

Sadly this is not at all what the $1.25/day (2005 PPP) standard means. It means being literally as poor as someone in say Michigan (or somewhere in the US where prices of stuff are close to the US average) in 2005, with $1.25 a day. It means being literally only being able to buy what a Michigander in 2005 could buy with $1.25 a day. Please note the new link to the definition of purchasing power parity.

See for example this blog post for laymen.

Of course, there are many practical difficulties with accurately counting the number of people in the world who are this miserable, but at least conceptually, this is what the World Bank measure is meant to capture. And sadly, according to both the World Bank and the UN, there are still today well over a billion people who are this miserable.

  • 1
    The whole "standard poverty figure" of $1.25 per day is ludicrous as in some countries that $1.25 buys a lot more than in others. In the US it doesn't buy a cup of coffee, in say Indonesia it buys you a meal (maybe not a big one, but enough to survive on), in Malawi it might well pay the rent, and 2 meals, with a bit of money left over. – jwenting Mar 31 '14 at 6:45
  • 1
    @KennyLJ no, it's a very common idea that $x is poverty irrespective of environment, which is clearly nonsense. That's precisely the idea that many "charities" are pushing in order to get people to give them money for sending to places like Malawi "for the poor people there who only have $1 per day". – jwenting Mar 31 '14 at 12:51
  • 1
    @KennyLJ yes, and it doesn't change a thing as that's not how people understand the idea of "having only $1 a day". It's all nice and cozy to have some "official" definition but it's not the definition that's in general use. In general use is "person X in Mogadishu has $1 so he's poor, person Y in New York has $10 so he's rich". In fact the person in New York is far poorer than the person in Mogadishu. And the World Bank themselves do exactly the same thing. – jwenting Mar 31 '14 at 12:59
  • 2
    @jwenting: I'm not sure I could make things clearer. What the World Bank measure means is NOT that person X in Mogadishu has the local currency equivalent of US$1.25. Instead it means that person X in Mogadishu has only enough to buy what the average person in the US could buy with US$1.25. – Kenny LJ Mar 31 '14 at 13:05
  • 2
    The comments section is not a discussion board. For discussions please use the history chat room; The Time Machine: chat.stackexchange.com/rooms/1560/the-time-machine – ihtkwot Mar 31 '14 at 14:58
3

Percent of people living below a poverty measurement comparable to the World Bank measurement represented by $1.25/day: 50%

Some two decades ago, historian Arthur M. Schlesinger Jr. lamented: "I don't know what is to be done to persuade people that the Great Depression took place. So far as I can tell, more and more Americans are coming to believe that it never occurred.... The whole thought of widespread economic collapse a generation ago in a nation as spectacularly opulent as ours is now, has for many -- perhaps for most of us -- no more reality any longer than a bad dream."

Understanding and Choosing a Measurement

The World Bank series of $1.25 per day is applied to the poorest of the poor developing nations to provide us information on their economic improvements. It is an absolute measurement that gives data on extreme deprivation: those without access to sanitation and healthful food, which causes malnutrition, high infant mortality and early death. Absolute measurements of poverty are never truly absolute. So, it's also helpful to understand the range of how poor $1.25/day is. Some in this measurement own TVs and radios, few own productive assets such as small plots farm land (it depends largely on the country), sewing machines or tractors, and they generally have some access to one or more public utilities. Ownership of basic clothing, such as shoes, is minimal, but adequate. Food is inadequate. This is the most important one, because the poor spend the most on food and its the easiest to track and understand anywhere. All people everywhere if they don't get enough of the right foods will become sick more often, so this is how we know that many in the Great Depression had the same standard of living.

But this does not give us data on for example orphans, war refugees or victims of famine, etc all who are much poorer. It is a measure above the minimum for survival as well, but below subsistence level. For example, to survive a person must have a diet of corn, rice and beans of 1800 calories/day. For subsistence level, a person should have all basic necessities met. In the modern world, we have a higher standard for this, so it includes clean water, electricity, toilet, running water, and heating in colder climates, without needing public assistance. This is important because some people literally starved to death in the Great Depression. They will not be the subject of this answer.

In the 1980's, 70% of people in South Asia lived below this measurement. There are other modern measurements applied to developed countries. The UN's Human Development Index seems to be the most popular, but there are many.

Even so, the Bank has never insisted on using just one line; indeed, in its work with specific developing countries, the Bank uses the national poverty line considered most appropriate in each country.

The Chen-Ravallion paper used five international lines. The lowest of these was $1.00 a day at 2005 prices, which is very close to India’s official poverty line. The next lowest was $1.25 a day, which is the average line of the poorest 15 countries in the new data set. The highest was $2.50 a day, which is the median of all countries except the poorest 15

So, which amount is used depends on the nations prevailing wage and this measurement is not properly applied to developed nations at all, such as the US, since the people may be living under different economic conditions. The early United States was industrialized, but there wasn't much mechanized farming and consumer goods, such as clothing, which were much more relatively expensive in the United States economy at that time. For instance, the poor spend today 15% of their budgets on food and clothing combined. On the eve of the Depression, half of the budget for a middle class family would have gone to these expenses.

History of Poverty Measurements

During the nineteenth century, the word "poverty" had commonly(47) been used to designate what was more precisely known as "pauperism"(48)--the state of receiving or being "dependent" on public relief or private charitable assistance. About 1900, however, some social workers and others began to use the word "poverty" with a new meaning--insufficient income, regardless of the source of that income.

The $1.25/day figure inflation adjusted for 1932 wages is 9 cents/day. The lowest ever poverty figure was provided by W.E Dubois in his late 19th century study of African-Americans in Philadelphia. He provides the figure of $5/week for a family of five as "very poor." Converted to 1932 it equals 40 cents per day for an urban, non-farm worker and is still well above 9 cents a day. This isn't a scientific poverty level, but likely a direct translation of the work British economist Booth in his work describing London poverty. New York orphan child sweat shop workers earned 20 cent/day for 9 hour days in 1932. This was apparently not enough to provide rent and they lived in subways, clearly placing them below subsistence level.

The poverty levels that will be provided will concentrate on targeting the amount of money an American needed to earn to avoid malnutrition, infant mortality, disease, early death or other consequences of severe poverty. This is an example of a good early poverty level:

In 1907, Louise Bolard More... 200 New York City families, based on work done between November 1903 and September 1905...Most of the families studied were working-class families, but a few were families of "petty shopkeepers." Four fifths of the families had annual incomes between $500 and $1500, with others going as low as $250 and as high as $2556;..finding... a "well-nourished" family of five needed at least $6 a week ($312 a year) for food. She then noted that for her whole sample of families (not just the families at the lower end of the sample), food accounted for 43.4 percent of total expenditures. Applying the percentage share to the food expenditure, she concluded that "a 'fair living wage' for a workingman's family of average size in New York City should be at least $728. a year,

This converts to 40 cents/day for 1904 or 61 cents/day for 1932 for an urban worker in New York.

1917...the careful studies of infant mortality by the Federal Children's Bureau... In a steel manufacturing town, Johnstown, Pa., for example, it was found that unless the family had an annual income of about $800 or more, the death rate among infants was considerably above the average

1918, Sydenstricker, Public Health Statistician in the U.S. Public Health Service...disabling illnesses among Southern cotton-mill workers. They found that the proportion of working days lost due to disabling sickness was significantly higher... for workers below a particular equivalent-income level...determined that this equivalent-income level would be equivalent to about $900 a year for the "normal" family of five persons in "typical communities elsewhere in the United States."

Converting these is confusing because there was massive deflation in wages and prices between 1919-1932. More or less this sets 47-53/cents per day as a national average.

The Federal Government set unofficial poverty guidelines during the Depression, such as the WPA "emergency budget."

The emergency budget was "a direct concession to conditions produced by the depression, constructed...--yet "those forced to exist at the emergency level for an extended period may be subjected to serious health hazards."... Its food component was the Agriculture Department's RDEU. At March 1935 prices, the average annual cost of the emergency budget (based on the unweighted average of figures for the 59 cities) was $903.27

This is 63 cents/day. The RDEU was considered NOT appropriate for long time use, since it was nutritionally insufficient. The WPA set these guidelines to attempt to help families budget as economically as possible. The figure of $1,260.62 was set as the minimum for a family of "small means" to purchases only proper food housing and clothing, but not cars, tractors, better housing or save for their children's education.

National Income Distribution and Poverty Rates

According to Michael B. Katz and Mark J. Stern in Poverty in Twentieth-Century America, through the usage of a reconstruction of early poverty data proposals, the level is lower:

the poverty threshold for a non-farm family of four was $925.18.

At the end of the 1930s, nearly half the households in America had incomes below the poverty line;

This figure is very much in line with the historical poverty measurements. Therefore, 50% of the American population during the Great Depression were suffering deprivation on par with the poorest of the poor of the world today.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.