Comparing economies and poverty is complex because 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, which he calls “average poverty.”
He notes that “average poverty is significantly higher in the United States, even though average incomes there are higher than in most Western European countries.”
Comparing GDP per capita between the United States and Europe reveals a striking result: the poorest state in the U.S. rivals Germany.
In the third quarter of 2024, Mississippi, the poorest state in the U.S., had a GDP per capita of $49,780. In Germany, it was $51,304 in 2024, with a difference of only about $1,500.
In terms of purchasing power parity (PPP), the United States is in a much more favorable position than most EU countries, with the exception of Luxembourg and Ireland, as shown in a Euronews Business article.
What is “average poverty”?
Olivier Sterck emphasizes that considering poverty as a continuum changes the perspective. This sheds light on the shortcomings of poverty thresholds and the importance of inequalities.
According to Sterck’s research published on SSRN, the “average poverty” corresponds to the average time needed to earn 1 dollar. This measure is inclusive, sensitive to wealth distribution, decomposable, and aligns with how experts and the public perceive poverty.
This dollar is expressed in international dollars, meaning it can buy the same amount of goods and services in any country as a U.S. dollar in the United States. It is often used in conjunction with PPP data. The “time” refers to a day of life for any individual, regardless of age or status, not just the hours worked by an employed person.
Time needed to earn 1 international dollar
In 2025, it took 63 minutes to earn 1 dollar in the United States. This is about twice as long as in Germany, France, and the UK.
In Germany, the leading economy in Europe, it takes 26 minutes. In France, it’s 31 minutes, while in the UK, it slightly rises 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 measure, Sterck found that global poverty has decreased by 55% since 1990. The time needed to earn one dollar has gone from half a day to five hours.
Increase in “average poverty” in the U.S. and decrease in Europe
The new measure also reveals that “average poverty” in the U.S. has almost continuously increased since 1990, despite significant 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 U.S., similar to France (42 minutes) and shorter than the UK (51 minutes). Germany had the shortest time, at 34 minutes.
“Picking two random individuals from these countries’ populations, the expected income ratio is over 4 in the U.S., but only around 1.5 in the three European countries. This shows that income levels are much more dispersed in the U.S. Consequently, there is a higher proportion of low-income individuals in the U.S., and they take longer to earn 1 dollar,” stated Olivier Sterck to Euronews Business.
Growth in average income vs. average inequality
According to this measure, the time needed to earn 1 dollar increased by 20 minutes, or 47%, in the U.S. over the past 35 years. The three European economies saw decreases, with the UK experiencing the largest drop.
Why is this happening? He points out that in all four countries, average incomes increased by just over 1% annually in recent decades, according to World Bank GDP data. However, in the U.S., average inequality grew at a rate of about 2.2% per year, surpassing income growth.
“This explains why average poverty has increased in the U.S.: average inequality has been rising faster than average income,” he explained.
In contrast, the UK, France, and Germany saw relatively stable inequalities, so income growth led to a reduction in average poverty.
How growing economies become poorer
“How can the economy of a wealthy country grow while becoming poorer?” Sterck questioned, referring to the U.S. in his article for The Conversation.
His answer is simple: inequality.
He notes that poverty can change for two main reasons: incomes increase or decrease, or income distribution becomes more or less unequal.
In the case of the U.S., average poverty increases even in a growing economy, as inequalities grow faster than incomes.
“The U.S. 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, irrespective of political orientation, demographic composition, or economic structure,” he wrote.
Income inequality, measured by the Gini coefficient, is higher in the U.S. than in major European economies. Higher values indicate greater inequality.
