Poverty is not having enough material possessions or income for a person’s needs. Poverty may include social, economic, and political elements.
Absolute poverty is the complete lack of the means necessary to meet basic personal needs, such as food, clothing and shelter. The threshold at which absolute poverty is defined is always about the same, independent of the person’s permanent location or era.
On the other hand, relative poverty occurs when a person cannot meet a minimum level of living standards, compared to others in the same time and place. Therefore, the threshold at which relative poverty is defined varies from one country to another, or from one society to another. For example, a person who cannot afford housing better than a small tent in an open field would be said to live in relative poverty if almost everyone else in that area lives in modern brick homes, but not if everyone else also lives in small tents in open fields .
Governments and non-governmental organizations try to reduce poverty. Providing basic needs to people who are unable to earn a sufficient income can be hampered by constraints on government’s ability to deliver services, such as corruption, tax avoidance, debt and loan conditionalities and by the brain drain of health care and educational professionals. Strategies of increasing income to make basic needs more affordable typically include welfare, economic freedoms and providing financial services.
Absolute poverty
Absolute poverty refers to a set standard which is consistent over time and between countries. First introduced in 1990, the dollar a day poverty line measured absolute poverty by the standards of the world’s poorest countries. The World Bank defined the new international poverty line as $1.25 a day in 2008 for 2005 . In October 2015, they reset it to $1.90 a day.
Absolute poverty, extreme poverty, or abject poverty is «a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services.» The term ‘absolute poverty’, when used in this fashion, is usually synonymous with ‘extreme poverty’: Robert McNamara, the former president of the World Bank, described absolute or extreme poverty as, «a condition so limited by malnutrition, illiteracy, disease, squalid surroundings, high infant mortality, and low life expectancy as to be beneath any reasonable definition of human decency.» Australia is one of the world’s wealthier nations. In his article published in Australian Policy Online, Robert Tanton notes that, «While this amount is appropriate for third world countries, in Australia, the amount required to meet these basic needs will naturally be much higher because prices of these basic necessities are higher.»
However, as the amount of wealth required for survival is not the same in all places and time periods, particularly in highly developed countries where few people would fall below the World Bank Group’s poverty lines, countries often develop their own national poverty lines.
An absolute poverty line was calculated in Australia for the Henderson poverty inquiry in 1973. It was $62.70 a week, which was the disposable income required to support the basic needs of a family of two adults and two dependent children at the time. This poverty line has been updated regularly by the Melbourne Institute according to increases in average incomes; for a single employed person it was $391.85 per week in March 2009. In Australia the OECD poverty would equate to a «disposable income of less than $358 per week for a single adult . in 2015 Australia implemented the Individual Deprivation Measure which address gender disparities in poverty.
For a few years starting 1990, the World Bank anchored absolute poverty line as $1 per day. This was revised in 1993, and through 2005, absolute poverty was $1.08 a day for all countries on a purchasing power parity basis, after adjusting for inflation to the 1993 U.S. dollar. In 2005, after extensive studies of cost of living across the world, The World Bank raised the measure for global poverty line to reflect the observed higher cost of living. In 2015, the World Bank defines extreme poverty as living on less than US$1.90 per day, and moderate poverty as less than $2 or $5 a day . It estimated that «in 2001, 1.1 billion people had consumption levels below $1 a day and 2.7 billion lived on less than $2 a day.» A ‘dollar a day’, in nations that do not use the U.S. dollar as currency, does not translate to living a day on the equivalent amount of local currency as determined by the exchange rate. Rather, it is determined by the purchasing power parity rate, which would look at how much local currency is needed to buy the same things that a dollar could buy in the United States. while in India it was US$1.0 per day These different poverty lines make data comparison between each nation’s official reports qualitatively difficult. Some scholars argue that the World Bank method sets the bar too high, others argue it is low. Still others suggest that poverty line misleads as it measures everyone below the poverty line the same, when in reality someone living on $1.20 per day is in a different state of poverty than someone living on $0.20 per day. In other words, the depth and intensity of poverty varies across the world and in any regional populations, and $1.25 per day poverty line and head counts are inadequate measures.
The share of the world’s population living in absolute poverty fell from 43% in 1981 to 14% in 2011. The economist Max Roser estimates that the number of people in poverty is therefore roughly the same as 200 years ago.) of the world population was living poverty.
The proportion of the developing world’s population living in extreme economic poverty fell from 28 percent in 1990 to 21 percent in 2001. In East Asia the World Bank reported that «The poverty headcount rate at the $2-a-day level is estimated to have fallen to about 27 percent, down from 29.5 percent in 2006 and 69 percent in 1990.» In Sub-Saharan Africa extreme poverty went up from 41 percent in 1981 to 46 percent in 2001, which combined with growing population increased the number of people living in extreme poverty from 231 million to 318 million.
In the early 1990s some of the transition economies of Central and Eastern Europe and Central Asia experienced a sharp drop in income. The collapse of the Soviet Union resulted in large declines in GDP per capita, of about 30 to 35% between 1990 and the through year of 1998 . As a result, poverty rates tripled, excess mortality increased, and life expectancy declined. In subsequent years as per capita incomes recovered the poverty rate dropped from 31.4% of the population to 19.6%. The average post-communist country had returned to 1989 levels of per-capita GDP by 2005, although as of 2015 some are still far behind that. According to an article in Foreign Affairs, there were generally three paths to economic reform taken post Soviet collapse. Those nations that took a «radical» or «gradual» reform rate have GDP per capita similar to other nations in their stage of economic development at generally 150% of their transition year GDP. Nations that took a «slow» approach had much slower, and lower economic growth, higher Gini
coefficients, and poorer health outcomes. Currently, those nations sit at 125% of their transition year GDP per capita. A 2009 study published in The Lancet suggested that radical economic changes and the resulting short term unemployment led to temporary increases in the mortality rate of adult males.
World Bank data shows that the percentage of the population living in households with consumption or income per person below the poverty line has decreased in each region of the world since 1990:
According to Chen and Ravallion, about 1.76 billion people in developing world lived above $1.25 per day and 1.9 billion people lived below $1.25 per day in 1981. The world’s population increased over the next 25 years. In 2005, about 4.09 billion people in developing world lived above $1.25 per day and 1.4 billion people lived below $1.25 per day . Some scholars caution that these trends are subject to various assumptions and not certain. Additionally, they note that the poverty reduction is not uniform across the world; economically prospering countries such as China, India and Brazil have made more progress in absolute poverty reduction than countries in other regions of the world.
The absolute poverty measure trends noted above are supported by human development indicators, which have also been improving. Life expectancy has greatly increased in the developing world since World War II and is starting to close the gap to the developed world. Child mortality has decreased in every developing region of the world. The proportion of the world’s population living in countries where per-capita food supplies are less than 2,200 calories per day decreased from 56% in the mid-1960s to below 10% by the 1990s. Similar trends can be observed for literacy, access to clean water and electricity and basic consumer items.
Relative poverty
Relative poverty views poverty as socially defined and dependent on social context, hence relative poverty is a measure of income inequality. Usually, relative poverty is measured as the percentage of the population with income less than some fixed proportion of median income. There are several other different income inequality metrics, for example, the Gini coefficient or the Theil Index.
Relative poverty is the «most useful measure for ascertaining poverty rates in wealthy developed nations». Relative poverty measure is used by the United Nations Development Program, the United Nations Children’s Fund, the Organisation for Economic Co-operation and Development and Canadian poverty researchers.
«Relative poverty reflects better the cost of social inclusion and equality of opportunity in a specific time and space.»
«Once economic development has progressed beyond a certain minimum level, the rub of the poverty problem – from the point of view of both the poor individual and of the societies in which they live – is not so much the effects of poverty in any absolute form but the effects of the contrast, daily perceived, between the lives of the poor and the lives of those around them. For practical purposes, the problem of poverty in the industrialized nations today is a problem of relative poverty .»
In 1776 Adam Smith in the Wealth of Nations argued that poverty is the inability to afford, «not only the commodities which are indispensably necessary for the support of life but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without».
In 1964 in a joint committee economic President’s report in the United States, Republicans endorsed the concept of relative poverty. «No objective definition of poverty exists… The definition varies from place to place and time to time. In America as our standard of living rises, so does our idea of what is substandard.»
In 1965 Rose Friedman argued for the use of relative poverty claiming that the definition of poverty changes with general living standards. Those labeled as poor in 1995 would have had «a higher standard of living than many labeled not poor» in 1965.
In 1979, British sociologist, Peter Townsend published his famous definition, «individuals … can be said to be in poverty when they lack the resources to obtain the types of diet, participate in the activities and have the living conditions and amenities which are customary, or are at least widely encouraged or approved, in the societies to which they belong «. This definition and measurement of poverty was profoundly linked to the idea that poverty and societal participation are deeply associated.
Peter Townsend transformed the conception of poverty, viewing it not simply as lack of income but as the configuration of the economic conditions that prevent people from being full members of the society.
Relative poverty measures are used as official poverty rates by the European Union, UNICEF, and the OECD. The main poverty line used in the OECD and the European Union is based on «economic distance», a level of income set at 60% of the median household income.
Many wealthy nations have seen an increase in relative poverty rates ever since the Great Recession, in particular among children from impoverished families who often reside in substandard housing and find educational opportunities out of reach.
Secondary poverty
Secondary poverty refers to those that earn enough income to not be impoverished, but who spend their income on unnecessary pleasures, such as alcoholic beverages, thus placing them below it in practice.
In 18th- and 19th-century Great Britain, the practice of temperance among Methodists, as well as their rejection of gambling, allowed them to eliminate secondary poverty and accumulate capital.
How is poverty measured? 