Comparing economies and poverty is challenging, as different measures can lead to different results. Olivier Sterck, an Associate Professor of Economics at the University of Oxford, has developed a new way to measure poverty, which he calls “average poverty”.

He finds that “average poverty is substantially higher in the US, even though average incomes are higher than in most Western European countries”.

When Gross Domestic Product (GDP) per capita is compared between the US and Europe, the figures suggest a striking result: the poorest US state rivals Germany.

In the third quarter of 2024, Mississippi, the poorest US state, had a GDP per capita of €49,780 ($53,872). In Germany, it was €51,304 in 2024 — a gap of only about €1,500.

In purchasing power parity (PPP) terms, the US is in a significantly stronger position than most EU countries, except for Luxembourg and Ireland, as a Euronews Business article shows.

What is ‘average poverty’?

However, Olivier Sterck emphasises that viewing poverty as a spectrum changes the conversation. It reveals what poverty lines miss and why inequality matters so much.

According to Sterck’s research, published on SSRN, an online repository for academic work, “average poverty” is defined as the average time needed to earn $1. “The measure is inclusive, distribution-sensitive, decomposable, and aligns with how both experts and the public conceptualise poverty,” he says.

The $1 is measured in international dollars. This means it buys the same amount of goods and services in any country as a US dollar does in the United States. It is often used alongside purchasing power parity (PPP) data. The “time” refers to a day of life for anyone, at any age and in any circumstance — not just the hours worked by someone with a job.

Time needed to earn $1 in international dollars

As of 2025, the time needed to earn $1 is 63 minutes in the US. This is about twice the average across Germany, France and the UK.

In Germany, Europe’s largest economy, it takes 26 minutes. In France, the figure is 31 minutes, while in the UK it rises slightly to 34 minutes.

These figures suggest that average poverty in the US is about twice that of these three countries.

Using this metric, Sterck finds that global poverty has declined by 55% since 1990. The time needed to earn $1 has fallen from about half a day to five hours.

Average poverty rises in the US, declines in Europe

The new measure also shows that average poverty in the US has increased almost continuously since 1990, despite strong growth in average incomes. In contrast, it has declined over time in most other high-income countries.

For example, in 1990, it took 43 minutes to earn $1 in the US. This was almost the same as in France (42 minutes) and shorter than in the UK (51 minutes). Germany had the lowest time at 34 minutes.

“Take two individuals randomly from the populations of these countries: the expected ratio of their incomes is above 4 in the US, but only about 1.5 in the three European countries. This shows how income levels are much more dispersed in the US.

As a result, there is a higher proportion of individuals with low incomes in the US, and they take more time to earn $1,” Olivier Sterck told Euronews Business.

Growth in average income vs average inequality

According to this metric, the time needed to earn $1 has risen by 20 minutes, or 47%, in the US over the past 35 years. All three European economies recorded declines, with the UK seeing the largest drop.

Why is that? He points out that, in all four countries, average incomes have grown by a little over 1% per year over recent decades, according to World Bank PIP data. However, in the US, average inequality has increased by about 2.2% per year, outpacing income growth.

“This explains why average poverty increased in the US: average inequality grew faster than average income,” he says.

By contrast, in the UK, France and Germany, inequality remained relatively stable, so income growth translated into a reduction in average poverty.

How growing economies become poorer

“How can a rich country’s economy grow and yet become poorer?” Sterck asks, referring to the US 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 US case, average poverty increases even in a growing economy because inequality rises faster than incomes grow.

“And the US has one of the most unequal economies in the world, and by far the most unequal among rich countries. Across all 50 states, inequality has risen sharply since 1990, regardless of political orientation, demographic composition or economic structure,” he writes.

Income inequality, measured by the Gini coefficient, is higher in the US than in major European economies. Higher values indicate greater inequality.