Absolute and Relative Poverty

I’ve already mentioned the World Bank’s startling definition of extreme poverty: $1.25, adjusted for PPP. This is what is known as absolute poverty and it is seldom used by politicians—who prefer to look at poverty in relative terms.

Relative poverty is slightly more involved, and the BBC weighs in with the internationally accepted definition of relative poverty: 60% of the median income for a given country.

This is not to comment on the experience of poverty or the rights and wrongs of who gets what, just to show how the system works. […]

It’s the calculation the government uses to measure its success in reducing poverty, including child poverty, for which it sets targets. It’s also used for country comparisons. […]

[The median is used] because calculating the mean would include everyone, including the Chelsea football team’s stellar earners. Would it make sense to say that one person’s poverty depends on what John Terry earns [£150,000 /week]? Using the mean would make it a measure of inequality.

But then some have argued that relative poverty is so similar to income inequality that the latter term should be used instead.

1 thought on “Absolute and Relative Poverty

  1. Steven

    Using only relative poverty measurements is great if you’re trying to produce some feel-good statistics in regions where most people are living in absolute poverty but beyond that it only obfuscates economic injustices and should ideally be combined with absolute poverty statistics.

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