New research from the University of Oxford highlights that average poverty in the United States is significantly higher than in major European countries, even though average incomes are comparatively higher. The study, led by Associate Professor of Economics Olivier Sterck, introduces a new measure of poverty called “average poverty,” based on the time required to earn $1 in international dollars.
Using this metric, it takes 63 minutes on average for someone in the US to earn $1. This is roughly twice the time needed in Germany, France, and the UK, where it takes 26, 31, and 34 minutes, respectively. International dollars are adjusted for purchasing power parity, meaning they represent the same purchasing capacity in any country as a US dollar does in the United States. Sterck emphasizes that the measure accounts for the broader population, including those without formal employment, making it sensitive to income distribution as well as average income levels.
The study reveals a stark contrast between US states and European countries. In the third quarter of 2024, Mississippi, the US’s poorest state, had a GDP per capita of €49,780 ($53,872), almost matching Germany’s €51,304. Yet, despite higher per-capita wealth, the average American must work significantly longer to earn a single dollar of purchasing power, reflecting rising inequality.
Sterck’s research shows that average poverty in the US has increased steadily since 1990, even as incomes have grown. In 1990, it took 43 minutes to earn $1 in the US, comparable to France’s 42 minutes and shorter than the UK’s 51 minutes. In Germany, it was 34 minutes. By contrast, average poverty in Germany, France, and the UK has declined over the same period, reflecting more stable income distribution.
The driving factor, according to Sterck, is inequality. While average incomes in the US have grown at just over 1% per year, income inequality has increased by roughly 2.2% annually. This means that the benefits of economic growth have been concentrated among higher earners, leaving many Americans effectively poorer relative to their European counterparts.
Sterck points out that income dispersion in the US is far greater than in the European countries studied. Randomly selecting two individuals from the US population yields an expected income ratio of more than 4, compared with about 1.5 in Germany, France, and the UK. This reflects a larger proportion of low-income individuals who must spend more time earning each international dollar.
The study also shows that global average poverty has declined by 55% since 1990, with the time needed to earn $1 falling from roughly half a day to five hours. However, the US stands out as an exception, where rising inequality has reversed gains for large segments of the population.
Sterck concludes that growing economies can still experience rising poverty if inequality outpaces income growth. The US case illustrates how wealth concentration can undermine living standards, even in one of the world’s richest nations, underscoring the need to consider both income and distribution in assessing economic well-being.
