Poverty headcount ratio

The poverty headcount ratio is the percentage of a population whose income or consumption falls below a defined poverty line. It is the simplest and most widely reported poverty measure: count everyone below the line, divide by the total population, and multiply by 100.

The poverty line itself varies by context: national poverty lines are set by individual governments to reflect local cost of living, while cross-country comparisons typically use a common international line set by the World Bank and expressed in purchasing-power-parity terms. Unlike the gini coefficient, which measures how unequally income is distributed, the headcount ratio only counts how many people fall below a fixed threshold and says nothing about how far below the line they are or how income is spread among the non-poor.

The measure is central to tracking progress on poverty-related development goals and appears throughout monitoring and evaluation and impact evaluation work in development programs, often alongside the Human Development Index and median household income. Its main pitfall is that it treats someone earning one cent below the line the same as someone earning nothing at all — a small change in the poverty line or a small income gain for people just below it can move the ratio substantially without reflecting a meaningful change in living standards. Analysts often pair it with a poverty gap or severity measure to capture depth as well as incidence.