3.14 - Poverty
The meaning of poverty
Poverty describes a situation where individuals or households lack the resources to meet essential needs. It affects people's ability to live a decent life and can be viewed in different ways, depending on whether it focuses on basic survival or comparison with others in society.
Types of poverty
Poverty is defined in two ways, and they differ in what a household's income is compared against.
| Absolute poverty | Relative poverty | |
|---|---|---|
| When a household counts as poor | Its income falls below a fixed level needed to afford essential items like food, shelter, and clothing | Its income falls below a set percentage of the median income in its own society |
| Effect of wider society being richer | None, since the standard of basic needs is fixed regardless of wider societal wealth | The threshold rises with the median income, so the measure reflects inequality |
| A household that can afford basic needs | Is not in absolute poverty | May still be in relative poverty, if it cannot afford the typical lifestyle of its society |
The more unequally income is distributed across a population, the more significant relative poverty becomes.
Dimensions of poverty beyond income
Poverty involves more than just low earnings; it includes various aspects that impact quality of life:
- Access to nutritious food and secure shelter
- Availability of essential services such as education and healthcare
- Protection from violence or insecurity
- Opportunity to participate in community decisions and have a voice in society
Measuring poverty
Measuring poverty helps governments and organisations understand its scale, draw attention to the issue, and design effective policies. Income is the most common basis for these measurements, but other approaches consider broader factors.
The poverty line
The poverty line represents the minimum income required for a household to meet basic needs. It serves as a benchmark for identifying who is in poverty.
Measuring absolute poverty
Absolute poverty is assessed by comparing incomes to a fixed threshold. The percentage of the population with income below this line indicates the extent of poverty.
International poverty line:
- The World Bank sets an international poverty line, adjusted over time for inflation and living costs.
- Originally $1.00 per day in 1990, updated to $1.25, then $1.90 in 2015, $2.15 in 2022, and $3.00 per day at 2021 purchasing power parity in 2025.
- This line uses purchasing power parity (PPP) to adjust for differences in what money can buy in various countries.
Measuring relative poverty
Relative poverty compares incomes within a society. It is typically defined as income below 50% of the national median. For example, if the median household income in a country is £32,000 per year, the relative poverty line might be set at £16,000 (50% of the median).
The Multidimensional Poverty Index (MPI)
The Multidimensional Poverty Index (MPI), developed by the Oxford Poverty & Human Development Initiative and the United Nations Development Programme in 2010, evaluates poverty across multiple areas beyond income.
The MPI uses three main dimensions with specific indicators:
- Health - Child mortality rates and access to nutrition.
- Education - Years of schooling completed and children's school attendance.
- Living standards - Access to cooking fuel, sanitation facilities, safe drinking water, electricity, adequate housing, and household assets.
People are classified as "MPI poor" if they experience deprivation in at least three indicators. The index also measures the intensity of poverty by calculating the average percentage of deprivations faced. Globally, it identifies around 1.57 billion people in multidimensional poverty, compared to about 800 million in absolute poverty based on income alone.
Difficulties in measuring poverty
Accurately measuring poverty is challenging due to various practical and conceptual issues. These limitations can affect the reliability of data and the effectiveness of anti-poverty strategies.
Challenges in defining and collecting data
- Variations in definitions - Different views on what constitutes poverty make it hard to agree on a universal standard, leading to inconsistencies across studies or countries.
- Issues with data collection - Household surveys, the main source of data, are often conducted infrequently or lack sufficient detail.
- Problems with sampling - Surveys may exclude vulnerable groups like the homeless, drug users, or street children, underestimating the true scale of poverty.
- Lack of detailed breakdowns - Data often fails to separate information by factors such as gender, disability, or age, hiding specific patterns of poverty.
Limitations of poverty lines and income-based measures
- Arbitrary cutoffs - Poverty lines can create artificial boundaries that do not reflect the real experiences of those in need, potentially understating the severity for some groups.
- Unreliable income assumptions - These measures assume steady earnings, but many in poverty have irregular income, such as seasonal workers who only receive payment after harvests, leading to misleading assessments.