Comparing economies and poverty is complex, as different measures can lead to different results. Olivier Sterck, associate professor of economics at the University of Oxford, has developed a new method of measuring poverty, called “average poverty”.
He notes 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 state in America rivals Germany.
In the third quarter of 2024, Mississippi, the poorest US state, had a GDP per capita of 49,780 international dollars (53,872 $). In Germany, it stood at 51,304 international dollars in 2024, an difference of only about 1,500 international dollars.
In terms of purchasing power parity (PPP), the United States is in a much more favorable position than most EU countries, except for Luxembourg and Ireland, as shown in an article from Euronews Business.
What is “average poverty”?
However, Sterck emphasizes that viewing poverty as a continuum changes the perspective. This highlights the shortcomings of poverty thresholds and helps understand 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 measurement is inclusive, sensitive to wealth distribution, decomposable, and reflects how experts and the general public perceive poverty,” he explains.
This dollar is expressed in international dollars, enabling the purchase of the same amount of goods and services in any country as one 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 and situation – not just the hours worked by someone with a job.
Time needed to earn 1 dollar in international dollars
In 2025, the time needed to earn 1 dollar is 63 minutes in the United States. This is roughly twice as much as the average in Germany, France, and the United Kingdom.
In Germany, the leading economy in Europe, it takes 26 minutes. In France, the time is 31 minutes, while in the UK it slightly increases to 34 minutes.
These figures suggest that “average poverty” in the United States is about twice as high as in these three countries.
Using this measurement, Sterck finds 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.
Average poverty increases in the United States and decreases in Europe
The new measure also shows that “average poverty” in the United States has increased almost continuously since 1990, despite a 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. This was almost the same as in France (42 minutes) and shorter than in the UK (51 minutes). Germany had the shortest time at 34 minutes.
“Take two randomly selected individuals from these countries’ populations: the expected ratio of their incomes is over 4 in the United States, but only about 1.5 in the three European countries. This shows that income levels are much more spread out in the United States.
Therefore, there is a higher proportion of low-income individuals in the United States, and they take longer to earn 1 dollar,” said Olivier Sterck to Euronews Business.
Growth of average income vs. average inequality
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 decreases, with the UK experiencing the most significant drop.
How does this happen? He points out that in these four countries, average incomes have increased by just over 1% per year in recent decades, according to World Bank PIP data. However, in the United States, average inequality has 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 faster than average income,” he explains.
In contrast, in the UK, France, and Germany, inequalities have remained relatively stable, so income growth has resulted in a decrease in average poverty.
How growing economies become poorer
“How can a rich country’s economy grow while getting poorer?” Sterck wonders, referring to the United States in his article for The Conversation.
His answer is simple: inequality.
He notes that poverty can change for two main reasons: incomes rise or fall, or income distribution becomes more or less unequal.
In the case of the United States, average poverty is increasing even in a growing economy because inequalities are growing 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 sharply increased 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 major European economies. Higher values indicate greater inequality.
