What is Economic Inclusion? How Do We Measure Economic Inclusion?

Economic inclusion is when people not only have their basic subsistence needs met but also are productive, fulfilled, and fully empowered to make choices about their lives.

People living in extreme poverty are deprived of basic human needs including food, safe drinking water, sanitation facilities, healthcare, and shelter. Access to these resources—which isn’t necessarily guaranteed by earning more than $2.15 per day—fulfills just the most basic physiological human needs, or the bottom of Maslow’s famous pyramid.

True economic inclusion goes beyond what people need for basic subsistence. An inclusive economy, according to McKinsey’s chief client officer, Liz Hilton Segel, means one that provides opportunities to underserved people and communities. It also creates higher-wage, more fulfilling jobs and ensures people’s mental health needs are met. Raising the standard to which we aspire—from a minimum of $2.15 to $12 per day in purchasing-power-parity (PPP) terms, a metric that compares standards of living in different countries—could help guarantee a set of human needs that go beyond basic subsistence, including good nutrition, decent housing, adequate healthcare, quality education, energy, transportation, and more. And critically, once this basic sufficiency is reached, people can begin to save money, which minimizes the risk of slipping back into poverty. This starts to look like not just economic inclusion—but economic empowerment.

How else is economic inclusion defined—and how can governments, organizations, and other stakeholders help pursue global economic empowerment?

Who is economically excluded?

Economic inclusion is a concept that will always be tied to the reduction of poverty. Generally, economic inclusion happens when someone moves out of poverty, but it’s not just that. Economic inclusion also means moving toward adequate health and well-being, education, affordable essentials, and sustainable communities.

Poverty, on the other hand, is usually expressed in monetary terms, as in whether people have enough money to meet their basic needs. It’s frequently calculated by looking at income, consumption, or both. The World Bank, for example, set the global extreme-poverty line at $2.15 in 2017 PPP terms. That’s the median of national poverty lines in more than two dozen of the world’s poorest countries. The World Bank has also developed specific poverty lines for lower- and upper-middle-income countries.

Other economists take a different approach. Development economist Lant Pritchett, for example, proposes using the high-income poverty threshold universally. He argues there is a basic unfairness in setting lower living standards in some countries and higher standards in others.

A related concept is economic empowerment, which goes a step further than inclusion. The McKinsey Global Institute’s (MGI’s) definition of economic empowerment is having the means to afford nutrition, education, healthcare, housing, water and sanitation, and energy. The absolute floor of empowerment is past the point at which people are at risk of falling back into poverty.

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