Defining PovertyThe World Bank definition follows the concept of absolute poverty. This approach is usually used to measure poverty in developing countries, where poverty is often a matter of subsistence. According to this concept, poverty is defined as follows: extreme poverty is living on less than 1.25 U.S. dollars a day (Purchasing Power Parity) and moderate poverty is living on less than two U.S. dollars a day. Developed countries normally report poverty rates based on relative poverty. Relative poverty is typically determined based on a certain percentage of a society’s median income. Every person living of an income underneath this poverty line is considered poor.
The U.S. Census Bureau follows a similar approach when calculating the poverty rate of the United States. According to this measure, 11.4 percent of the population lived in poverty in 2020. The child poverty rate in the United States was at 16.1 percent as of 2020, a decrease from 22 percent in 2010. The poverty rate in the U.S. greatly varies across different ethnic groups. While only 8.2 percent of the white population lived below the poverty line in 2020, the poverty rates for Blacks and Hispanics were 19.5 and 17 percent respectively.