Life on a Dollar a Day

To be officially poor in international terms is to live below the World Bank’s poverty line of US$1 per day. In actuality, the incomes of poor people vary by nation and by region, but by definition always add up to less than what is needed to make ends meet. To be poor is to have to choose among a range of necessities, not all of which you can afford. Food, shelter, health care, clothes, fuel, transportation, and tools or equipment needed for work are all basic expenditures vying for the limited family budget. Social obligations such as weddings, funerals, and gifts add to these basic needs. With little means and many needs, what do you spend your income on?

The Necessities

Food is the primary and immediate concern, and by far the major expense, for poor households. Studies show that the poorer the household, the greater the percentage of income spent on food. This is in spite of the fact that the poor often grow some of their own food. In Tanzania, the average rural household survived on just 32 cents a day in 2001, with 21 cents—65 percent—going for food (National Bureau of Statistics of Tanzania 2002:68-70). Food spending among the poor shows similar patterns in other regions: food purchases account for 60 percent of household spending in rural Morocco ($0.37/day) (World Bank 2001:4, Table 5) and 75 percent ($0.50/day) in Georgia (Yemtsov 1999:15, Table 5, 42). By comparison, a family in the United States spends an average of 14 percent of the household budget on food (U.S. Dept. of Labor 2004:4).

With food accounting for so large a share of daily finances, other critical necessities must receive proportionately less— often only pennies a day. Housing and the fuel or electricity to heat and cook with, for example, account for only 12 percent of spending among Argentina's poor (Lee 2000:8, Table 2). Health care, another priority for low-income families, receives only three cents of every dollar spent by Morocco's rural poor, the same amount spent in rural Georgia (World Bank 2001:9, Table 17; Yemtsov 1999:15, Table 5). Clothing and transportation costs account for a similarly small share of the daily dollar.

What You Can't Afford

When income does not fully cover even daily necessities, everything else becomes a luxury. Thus there are a great many things that the poor cannot afford to buy. Tools, materials, and upkeep for income-generating assets like transportation or farm equipment are all expenses that are routinely left out of the family budget. To cover gifts, dowries, and funerals— expenses at the heart of many social structures and customs—the poor must often sell what little land or livestock assets they have (Narayan et al. 2000a:149-150). Furniture, stylish clothing, or appliances—all items taken more or less for granted in the developed world—are largely an extravagance. Investments in hard assets or insurance to cushion against future hardships are even more difficult to afford. With no insurance or provision for emergencies, an already marginal income becomes an even more precarious foundation for the future.

Poverty often means not being able to take advantage of opportunities and investments that are open to others with more secure incomes. Education is a good example. Although the benefit of an education can dramatically increase a child's chance of leaving poverty, a poor family's budget does not always permit this. School costs can include tuition, supplies, and the loss of labor that the child could have contributed had he or she stayed home (Narayan et al. 2000b:242-244). Other investments that require savings or start-up capital are also out of reach, such as launching a small business, buying fertilizer or a fishing boat, or advertising to reach a wider market. Lacking such investment ability, the poor are often confined to subsistence activities and low-value wage labor that make it hard to get ahead.

This article was originally published by WRI as Box 1.2 in "World Resources 2005: The Wealth of the Poor—Managing Ecosystems to Fight Poverty," available online at http://population.wri.org/worldresources2005-pub-4073.html.