Poverty Threshold

The poverty threshold, or poverty line, is the minimum level of income deemed adequate in a given country. In practice, like the definition of poverty, the official or common understanding of the poverty line is significantly higher in developed countries than in developing countries.

The common international poverty line has in the past been roughly $1 a day. In 2008, the World Bank came out with a revised figure of $1.25 at 2005 purchasing-power parity (PPP).

Determining the poverty line is usually done by finding the total cost of all the essential resources that an average human adult consumes in one year. The largest of these expenses is typically the rent required to live in an apartment, so historically, economists have paid particular attention to the real estate market and housing prices as a strong poverty line affector.

Individual factors are often used to account for various circumstances, such as whether one is a parent, elderly, a child, married, etc. The poverty threshold may be adjusted annually.