GoKawiilComparing economies and poverty is challenging, as different measures can lead to different results. Olivier Sterck, an Associate Professor of Economics at the University of Oxford, has developed a new way to measure poverty, which he calls “average poverty”.
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He finds that “average poverty is substantially higher in the US, even though average incomes are higher than in most Western European countries”.
When Gross Domestic Product (GDP) per capita is compared between the US and Europe, the figures suggest a striking result: the poorest US state rivals Germany.
In the third quarter of 2024, Mississippi, the poorest US state, had a GDP per capita of €49,780 ($53,872). In Germany, it was €51,304 in 2024 — a gap of only about €1,500.
In purchasing power parity (PPP) terms, the US is in a significantly stronger position than most EU countries, except for Luxembourg and Ireland, as a Euronews Business article shows.
What is ‘average poverty’?
However, Olivier Sterck emphasises that viewing poverty as a spectrum changes the conversation. It reveals what poverty lines miss and why inequality matters so much.
According to Sterck’s research, published on SSRN, an online repository for academic work, “average poverty” is defined as the average time needed to earn $1. “The measure is inclusive, distribution-sensitive, decomposable, and aligns with how both experts and the public conceptualise poverty,” he says.
The $1 is measured in international dollars. This means it buys the same amount of goods and services in any country as a US dollar does in the United States. It is often used alongside purchasing power parity (PPP) data. The “time” refers to a day of life for anyone, at any age and in any circumstance — not just the hours worked by someone with a job.
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