Comparing economies and poverty is complex, as different measures can lead to different results. Olivier Sterck, a professor of economics at the University of Oxford, has developed a new method of measuring poverty called “average poverty.” He found that “average poverty is significantly higher in the United States, even though average incomes are higher there than in most Western European countries.” Comparing the gross domestic product (GDP) per capita between the United States and Europe reveals a striking result: the poorest U.S. state rivals Germany. In the third quarter of 2024, Mississippi, the poorest U.S. state, had a GDP per capita of 49,780 international dollars (53,872 US dollars). In Germany, it was 51,304 international dollars in 2024, a difference of only about 1,500 international dollars. In terms of purchasing power parity (PPP), the United States is in a much more favorable situation than most EU countries, with the exception of Luxembourg and Ireland, as shown in a Euronews Business article. However, Sterck emphasizes that viewing poverty as a continuum changes things. This allows for highlighting the shortcomings of poverty thresholds and understanding the importance of inequalities. According to Sterck’s research published on SSRN, an online platform for academic publications, “average poverty” corresponds to the average time needed to earn 1 dollar. “This measure is inclusive, sensitive to wealth distribution, decomposable, and corresponds to how experts and the general public perceive poverty,” he explains. This dollar is expressed in international dollars, meaning it can buy the same amount of goods and services in any country as a US dollar in the United States. It is often used in conjunction with PPP data. The “time” refers to a day in the life of any individual, regardless of age or status – not just the hours worked by an employed person. In 2025, it takes 63 minutes to earn 1 dollar in the United States. This is about twice as long as in Germany, France, and the United Kingdom. In Germany, the leading economy in Europe, it takes 26 minutes. France takes 31 minutes, while the UK slightly increases to 34 minutes. These figures suggest that average poverty in the United States is roughly twice as high as in these three countries. By using this measure, Sterck found that poverty worldwide has decreased by 55% since 1990. The time needed to earn one dollar has decreased from half a day to five hours. The new measure also shows that average poverty in the United States has almost continuously increased since 1990, despite strong growth in average incomes. In contrast, it has decreased over time in most other high-income countries. For example, in 1990, it took 43 minutes to earn 1 dollar in the United States, which was nearly the same as in France (42 minutes) but shorter than in the UK (51 minutes). Germany had the shortest time at 34 minutes. “Sterck states, “Let’s take two random individuals from the populations of these countries: the expected income ratio is over 4 in the United States, but only about 1.5 in the three European countries. This shows that income levels vary much more in the United States.” Consequently, there is a higher proportion of low-income individuals in the United States, and they take longer to earn 1 dollar. According to this measure, the time needed to earn 1 dollar has increased by 20 minutes, or 47%, in the United States over the past 35 years. The three European economies have seen reductions, with the UK experiencing the largest decline. How does this happen? Sterck points out that in all four countries, average incomes increased by just over 1% per year in recent decades, according to World Bank PIP data. However, in the United States, average inequality increased by about 2.2% per year, surpassing income growth. “This explains why average poverty has increased in the United States: average inequality has increased more rapidly than average income,” he explains. In contrast, in the UK, France, and Germany, inequalities remained relatively stable, resulting in reduced average poverty despite income growth. Sterck wonders, “How can the economy of a rich country grow while becoming poorer?” referring to the United States in his article for The Conversation. His answer is simple: inequality. He notes that poverty can evolve for two main reasons: incomes increase or decrease, or income distribution becomes more or less unequal. In the case of the United States, average poverty increases even in a growing economy because inequalities are increasing faster than incomes. “The United States has one of the most unequal economies in the world, and by far the most unequal among rich countries. In all 50 states, inequalities have increased significantly since 1990, regardless of political orientation, demographic composition, or economic structure,” he writes. Income inequality, measured by the Gini coefficient, is higher in the United States than in the leading European economies. Higher values indicate greater inequality.
