There are two indicators listed to monitor this target. One aims at international comparability. The other links monetary poverty to employment.

Since World Development Report 1990, the World Bank has tried to apply a common standard in measuring extreme poverty by averaging the national poverty lines of the countries with lowest per capita income using exchange rates that fluctuate less than market exchange rates.

Using this metric, the ILO develops the working poverty rate which reveals the proportion of the employed population struggling to survive on PPP U$1.90 per day despite being employed, implying that their employment-related incomes are not sufficient to ensure decent living conditions. The adequacy of earnings is a fundamental aspect of job quality, and these deficits in job quality could be keeping workers and their families in poverty.

Employment: All persons of working age who, during a short reference period (one week), were engaged in any activity to produce goods or provide services for pay or profit.

Poverty Line: Threshold below which individuals in the reference population are considered poor and above which they are considered non-poor. The threshold is generally defined as the per-capita monetary requirements an individual needs to afford the purchase of a basic bundle of goods and services.

Household in poverty: Households are defined as poor if their income or consumption expenditure is below the poverty line considering the number of household members and composition (e.g., number of adults and children).

Working poor: Employed persons living in households that are classified as poor, that is, that have income or consumption levels below the poverty line used for measurement.

Purchasing power parities (PPP): Conversion factor, private consumption, is the number of units of a country’s currency required to buy the same amount of goods and services in the domestic market as a U.S. dollar would buy in the United States. This conversion factor is applicable to private consumption. Statistically, PPPs are expenditure-weighted averages of relative prices of a vast number of goods and services on which people spend their incomes and like all statistics there is a margin of error around the estimates.

At the country level, comparisons over time may be affected by such factors as changes in survey types or data collection methods. The use of PPPs rather than market exchange rates attempts to taken into account differences in price levels across countries. However, it cannot be categorically asserted that two people in two different countries, living below US$1.90 a day at PPP, face the same degree of deprivation or have the same degree of need.

Poverty in the context of this indicator is a concept that is applied to households, and not to individuals, based on the assumption that households pool their income. This assumption may not always be true. This assumption is particularly important for children. This indicator cannot measure “monetary child poverty” but it can measure children in monetary poor households.

Moreover, the poverty status of a household is a function of the wage and other employment-related income secured by those household members in employment, income derived from asset ownership, plus any other available income such as transfer payments as well as the number of household members. Whether a worker is counted as working poor therefore depends on his or her own income, the income of other household members and the number of household members who need to be supported. It is thus often valuable to study household structure in relation to working poverty.

Despite progress in the last decade, the challenges of measuring poverty remain. The timeliness, frequency, quality and comparability of household surveys needs to increase substantially, particularly in the poorest countries. The availability and quality of poverty monitoring data remains low in small states, countries with fragile situations, and low-income countries and even some middle-income countries. The low frequency and lack of comparability of the data available in some countries create uncertainty over the magnitude of poverty reduction.

Besides the frequency and timeliness of survey data, other data quality issues arise in measuring household living standards. The surveys ask detailed questions on sources of income and how it was spent, which must be carefully recorded by trained personnel. Income is generally more difficult to measure accurately, and consumption comes closer to the notion of living standards. And income can vary over time even if living standards do not. But consumption data are not always available: the latest estimates reported here use consumption data for about two-thirds of countries.

However, even similar surveys may not be strictly comparable because of differences in timing or in the quality and training of enumerators. Comparisons of countries at different levels of development also pose a potential problem because of differences in the relative importance of the consumption of nonmarket goods. The local market value of all consumption in kind (including own production, particularly important in underdeveloped rural economies) should be included in total consumption expenditure but may not be. Most survey data now include valuations for consumption or income from own production, but valuation methods vary.

The construction of PPP also faces challenges. It is harder to measure than market-based rates. As calculating PPPs is a huge undertaking, new price comparisons are available only at infrequent intervals. Moreover, the PPP calculation excludes many countries.

The extreme poverty rate, a “headcount” measure, is one of the most commonly calculated measures of poverty. Yet it has the drawback that it does not capture income inequality among the poor or the depth of poverty. For instance, it fails to account for the fact that some people may be living just below the poverty line, while others experience far greater shortfalls. Policymakers seeking to make the largest possible impact on the headcount measure might be tempted to direct their poverty alleviation resources to those closest to the poverty line (and therefore least poor).

Lastly, these income/consumption-based poverty indicators do not fully reflect the other dimensions of poverty such as inequality, vulnerability and lack of voice and power of the poor.

The original “$1-a-day” line was based on a compilation of national lines for only 22 developing countries, mostly from academic studies in the 1980s. In 2009, based on a new compilation of national poverty it was updated to PPP U$1.25 a day (as an average of poverty lines for the poorest 15 countries of the 75 available at the time). The current extreme poverty line is set at $1.90 a day in 2011 PPP terms, which represents the mean of the national poverty lines found in the same poorest 15 countries ranked by per capita consumption.

When measuring international poverty of a country, the international poverty line at PPP is converted to local currencies in 2011 price and is then converted to the prices prevailing at the time of the relevant household survey using the best available Consumer Price Index (CPI). (Equivalently, the survey data on household consumption or income for the survey year are expressed in the prices of the ICP base year, and then converted to PPP dollars.) Then the poverty rate is calculated from that survey. All inter-temporal comparisons are real, as assessed using the country-specific CPI. Interpolation/extrapolation methods are used to line up the survey-based estimates with these reference years.

Working poverty rate = (Employed persons living on less than PPPUS$ 1.90 a day/Total employment) x 100

The working poverty rate (proportion of employed persons living in poverty) is disaggregated by sex and age.

The ILO produces global and regional estimates of employment by economic class (and thus, of working poverty rates) using the ILO’s Employment by Class (EbyC) model. These estimates are part of the ILO Estimates and Projections series, analysed in the ILO’s World Employment and Social Outlook reports. For more information, on the model used to derive these estimates, refer to the ILO paper “Employment and economic class in the developing world” (Kapsos and Bourmpoula, 2013), available at http://www.ilo.org/wcmsp5/groups/public/—dgreports/—inst/documents/publication/wcms_216451.pdf.

The preferred data source is a household survey with variables that can reliably identify both the poverty status of households and the economic activity of the household’s members. Examples include household income and expenditure surveys (HIES), living standards measurement surveys (LSMS) with employment modules, or labour force surveys (LFS) that collect information on household income. Such surveys offer the benefit of allowing the employment status and income (or consumption expenditure) variables to be derived from the same sampled households ideally for the same observation period.

Employment estimates derived from a household survey other than a labour force survey may, however, not be the most robust due to questionnaire design. Similarly, a labour force survey may not be the best instrument for collecting household income or consumption expenditure data, although an attached income module can be designed to achieve statistically reliable results, including ensuring an overlap in the observation period between household income (or consumption expenditure) and employment status.

Another possibility is to combine data from a household income and expenditure survey and from a separate labour force survey when the respondent households can be matched and consistency in the long observation period between the surveys can be obtained.

– Decent Work and the Sustainable Development Goals: A Guidebook on SDG Labour Market Indicators (ILO) https://www.ilo.org/stat/Publications/WCMS_647109/lang–en/index.htm
– ILOSTAT (https://ilostat.ilo.org/): ILOSTAT’s topic page on working poverty (https://ilostat.ilo.org/topics/working-poor/)
– Employment and economic class in the developing world (Kapsos and Bourmpoula, 2013)
http://www.ilo.org/wcmsp5/groups/public/—dgreports/—
inst/documents/publication/wcms_216451.pdf
– Decent Work Indicators Manual http://www.ilo.org/wcmsp5/groups/public/—dgreports/—
integration/documents/publication/wcms_229374.pdf (second version, page 70).