How to Calculate a Poverty Line
An absolute poverty line equals the cost of a food basket that meets a minimum calorie level plus an allowance for essential non-food needs, then scaled to household size.
The Poverty Line formula
Calculator
Enter the daily food cost, the non-food allowance and household size to build an absolute poverty line.
Price of a daily food basket that meets the calorie minimum.
Usually a full year, so the line is an annual figure.
Housing, fuel, clothing and transport, set as a share of the food budget.
How many people the household line has to cover.
Income or consumption of the household you are testing against the line.
A person needs $1,168 a year to clear the line. Anyone below it counts as poor no matter what everyone else earns.
- Annual food budget per person
- $730
- Non-food allowance per person
- $438
- Poverty line for the household
- $4,672
- Gap below the line
- $672
- Household status
- Below the poverty line
Feeding one person to the calorie minimum for this many days costs $730.
Essential non-food needs are valued at $438, taken as a share of the food budget rather than priced item by item.
Scaled to this household the line is $4,672 for the year.
The household is short by $672, which is what a transfer would have to cover to lift it to the line.
The line is a threshold, so this household either clears it or does not. How many households fail it is the separate headcount question.
How to calculate Poverty Line, step by step
- 1Price the minimum food basket. Work out what it costs one person a day to buy food meeting the calorie minimum the statistics agency uses, at local prices.
- 2Turn the daily cost into a yearly one. Multiply the daily food cost by the number of days the budget covers, normally a full year, so the line can be compared with annual income.
- 3Add an allowance for essential non-food needs. Housing, fuel, clothing and transport enter as a share of the food budget, taken from what households sitting at the food threshold actually spend on non-food items.
- 4Add the two parts. Poverty line = annual food budget + non-food allowance. That is the income or consumption one person needs to clear the line.
- 5Scale to the household and compare. Multiply by household size, then set the household's income or consumption against the line to see whether it counts as poor.
Worked example: Poverty Line
A statistics agency prices a food basket meeting the calorie minimum at $2 a day per person. Over 365 days that is $730 of food per person. Essential non-food needs are set at 60% of the food budget, or $438, so the poverty line is $730 + $438 = $1,168 per person a year. A household of four needs $1,168 × 4 = $4,672. A household living on $4,000 falls $672 below the line and counts as poor.
Poverty Line questions
What is the difference between a poverty line and a poverty rate?
The line is the threshold in money terms; the rate is the share of the population living below it. You have to fix the line first, then count people against it.
Why is the non-food allowance set as a share of the food budget?
Pricing calories is far easier than pricing every essential non-food item, so statisticians look at what households right at the food threshold spend on non-food needs and apply that ratio. The ratio chosen moves the line, which is why two agencies can report different poverty numbers for the same country.
Does an absolute poverty line change over time?
The basket stays the same but its price does not, so the line is re-priced as prices change. Left in fixed money terms it would quietly buy less each year and lower the standard it is meant to represent.
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