Or to put it another way... 50 years ago, people lived like that in Scotland. They don't anymore. Who's to say that places in the world that live like that today won't be as successful as Scotland has been in putting poverty behind them?
In the end, you're judging the success of a system (capitalism) with a metric internal to that system. What does that tell you?
It's in fact so ridiculous a measure that a slave/indentured servant "earning" 5$ a day is considered a-ok in that metric.
EDIT: I'll just rememind that downvote is not a "disagree" button.
And yes, working 12 hour days in a smog-infested city is better than extreme poverty. Life isn't a socialist realist painting. Literacy is better than illiteracy. Vaccination is better than no vaccination. Water from a tap is better than water in a bucket that you have to walk to get. Etc. People don't move to the cities because country life is getting worse; they move because city life is better.
Is income a pretty measure? No. But it's a good proxy. It's more fine-grained and less messy than something like birth rate.