What would it cost to eliminate poverty and ensure that each person on the planet enjoyed a ‘living wage’; enough income to meet their basic needs for a descent and good life?
First, the world’s leaders, along with the world’s billionaires, would have to issue a joint declaration of well-being, that all people on the planet are deserving of a sufficient ‘living wage’ that would meet their basic needs for a good life.
What is a living wage? A living wage is the income required to meet the basic needs for a reasonable good life of clean water, good air, good food, comfortable shelter, clothing and some healthy degree of autonomy.
The Catholic 13th century theologian Thomas Aquinas (building on the ideas of Aristotle) said what is required of a good life is sufficiency of material needs and virtuous action.
Based on Plato and Aquinas, the key virtues to act upon are moderation, courage, justice and wisdom.
Reality Check: The Facts
In 2015 there were an estimated 935 million people (12.7% of the world’s population) living below the extreme poverty line of $1.90/day. This is a significant improvement over 1981, when an estimated 44.0% of the world’s population lived below the extreme poverty line.
In China the improvement has been most dramatic; in 1981, 88.2% of its population lived in extreme poverty. In 2011 only 11.2% of China’s population lived in extreme poverty.
The current estimated global poverty line is $1.90 per day or roughly $500/yr
In 2005, according to poverty facts currently roughly 50% of the world’s people (over 3.2 billion) live on $2.50/day while 80% (5.15 billion) live on $10/day or less.The $10 dollar a day (US $3,650/yr) figure above is close to poverty levels in the US.
In the most recent estimates of total household wealth, a Credit Suisse report estimates that global households have amassed $250 trillion in total wealth (an amount equal to 100x JP Morgan’s assets) in 2015.
There were an estimated 7.35 billion people on the planet in 2015.
The richest 1% (about 73 million) of the world’s population owns 50% of the world’s total wealth ($125 trillion).
Of the richest 1%-ers there are 34 million people (0.7% of the global adult population) who had a net worth of at least US$1 million. These people hold 45% of global wealth.
Within the top 1% is there is a much more elite club multi-millionaire group representing 0.36 % of the world’s adult population or 123,800 adults with a net worth of more than $50 million.
Of the 123,800 multi-millionaires there were 1,810 billionaires in 2015, according to Forbes magazine, with an aggregate net worth was $6.48 trillion or an average net worth of $3.58 billion each. That means that 0.00003% of the world’s adult population controlled 8.6% of the world’s total wealth.
At the base of the global wealth pyramid are those with a net worth of less than $10,000, who account for a massive 71% of the world’s adult population or 3.8 million adults.
World’s Gross Product
To put these wealth numbers into perspective, consider that the world’s gross product in 2014 was US$78.28 trillion or 31.3% of the world’s total wealth.
The world’s wealthiest countries (approximately 1 billion people) accounted for 76% of the world gross product. The world’s top 10 economies, measured by GDP (gross domestic product) accounted for 89% of the world gross product.
The combined wealth of the world’s billionaires ($6.48 trillion) is a value 1.4 times larger than Japan’s GDP (the world’s 3rd largest economy with GDP of US$4.7 trillion) or 35% of US GDP (the world’s largest economy with a GDP of US$18.6 trillion).
Low income countries (2.4 billion people or 33% of the world’s population) accounted for just $1.6 trillion (2.1%) of world gross product.
How much would this cost to eliminate poverty around the world?
According to economist Jeffrey Sachs (author The End of Poverty), the total cost per year to end extreme poverty worldwide in 20 years, would be about $175 billion. I can’t validate Sachs estimate without a proper accounting of how much the current US$1.90/day extreme poverty rate would have to be raised. I would prefer to analyze the cost of securing a living wage for all of the world’s poor, including those in extreme poverty.
However, using Sach’s estimate of $175 billion to eliminate extreme poverty would equate to a mere $0.50 per day increase in wages for the estimated 935 million living on less than $1.90 per day.
In other words, we could end extreme poverty almost immediately (not over 20 years) simply by increasing the wages of the poorest on the planet by $0.50/day or a mere US$130 per year per extremely poor person.
By comparison, the average annual value of coffee consumed by an estimated 150 million Americans who drink coffee every day is somewhere between $2,780-$4,029 per annum. This is based on consumption of an average 3.2 cups of coffee (including espresso drinks) per day in the US at an average price of $3.45 for espresso-based drinks and $2.38 for brewed coffee. Using these figures I’ve estimated that the annual market value of coffee consumed in the US is roughly $300 billion per year. In other words the value of coffee consumption alone in the US would be 1.7 times the estimated cost of eliminating global extreme poverty.
$175 billion price tag to eliminate poverty is insignificant representing a mere 2.7% of the total wealth of the world’s 1,810 billionaires or 0.26% of the combined GDP (income) of the 10 richest countries in the world (the combined GDP of the 10 richest countries totals US$67.4 billion or 89.4% of the world’s total GDP).
Paying a Living Wage to the World’s Poor
I’ve estimated that roughly 5.0 billion people (68% of the world’s population) live with insufficient income or without a living wage. A living wages varies from one country to the next. However, in Africa a living wage can range from US$3.58-$14.39 per. If using a median living wage of US$9.00/day for Africa applied to the 5.0 billion people on the planet living below a living wage, then the estimate annual global cost of paying a living wage increment would be roughly $11.7 trillion per annum, or the equivalent of China’s GDP ($11.4 trillion)
Adding $11.7 trillion in global disposable income or spending power would be like adding another China to the world’s gross product; China is the world’s 2nd largest economy.
Moreover, raising the wages of the poorest amongst us will actually increase our global level of happiness and well-being.