relative poverty

The poverty threshold, poverty limit, poverty line or breadline is the minimum level of income deemed adequate in a particular country. The poverty line is usually calculated by estimating the total cost of one year's worth of necessities for the average adult.Poverty Lines – Martin Ravallion, in The New Palgrave Dictionary of Economics, 2nd Edition, London: Palgrave Macmillan The cost of housing, such as the rent for an apartment, usually makes up the largest proportion of this estimate, so economists track the real estate market and other housing cost indicators as a major influence on the poverty line. Individual factors are often used to account for various circumstances, such as whether one is a parent, elderly, a child, married, etc. The poverty threshold may be adjusted annually. In practice, like the definition of poverty, the official or common understanding of the poverty line is significantly higher in developed countries than in developing countries.

In October 2015, the World Bank updated the International Poverty Line (IPL), a global absolute minimum, to $1.90 per day (in PPP), where it currently stands (as of 2022), and also as of 2022, $3.20 per day in PPP for lower-middle income countries, and $5.50 per day in PPP for upper-middle income countries. Per the $1.90/day standard, the percentage of the global population living in absolute poverty fell from over 80% in 1800 to 10% by 2015, according to United Nations estimates, which found roughly 734 million people remained in absolute poverty.

History

The poverty threshold was first developed by Mollie Orshansky between 1963 and 1964. She attributed the poverty threshold as a measure of income inadequacy by taking the cost of food plan per family of three or four and multiplying it by a factor of three. In 1969 the inter agency poverty level review committee adjusted the threshold for only price changes.

Charles Booth, a pioneering investigator of poverty in London at the turn of the 20th century, popularised the idea of a ''poverty line'', a concept originally conceived by the London School Board. Booth set the line at 10 (50p) to 20 shillings (£1) per week, which he considered to be the minimum amount necessary for a family of four or five people to subsist on. Benjamin Seebohm Rowntree (1871–1954), a British sociological researcher, social reformer and industrialist, surveyed rich families in York, and drew a poverty line in terms of a minimum weekly sum of money "necessary to enable families … to secure the necessaries of a healthy life", which included fuel and light, rent, food, clothing, and household and personal items. Based on data from leading nutritionists of the period, he calculated the cheapest price for the minimum calorific intake and nutritional balance necessary, before people get ill or lose weight. He considered this amount to set his poverty line and concluded that 27.84% of the total population of York lived below this poverty line. p. 298 This result corresponded with that from Booth's study of poverty in London and so challenged the view, commonly held at the time, that abject poverty was a problem particular to London and was not widespread in the rest of Britain. Rowntree distinguished between primary poverty, those lacking in income and secondary poverty, those who had enough income, but spent it elsewhere (1901:295–96).

Absolute poverty and the International Poverty Line

The term "absolute poverty" is also sometimes used as a synonym for extreme poverty. Absolute poverty is the absence of enough resources to secure basic life necessities.

To assist in measuring this, the World Bank has a daily per capita international poverty line (IPL), a global absolute minimum, of $1.90 a day as of October 2015.

The new IPL replaces the $1.25 per day figure, which used 2005 data. In 2008, the World Bank came out with a figure (revised largely due to inflation) of $1.25 a day at 2005 purchasing power parity (PPP). The new figure of $1.90 is based on ICP PPP calculations and represents the international equivalent of what $1.90 could buy in the US in 2011. Most scholars agree that it better reflects today's reality, particularly new price levels in developing countries. The common IPL has in the past been roughly $1 a day.

These figures are artificially low according to Peter Edward of Newcastle University. He believes the real number as of 2015 was $7.40 per day.

Using a single monetary poverty threshold is problematic when applied worldwide, due to the difficulty of comparing prices between countries. Prices of the same goods vary dramatically from country to country; while this is typically corrected for by using PPP exchange rates, the basket of goods used to determine such rates is usually unrepresentative of the poor, most of whose expenditure is on basic foodstuffs rather than the relatively luxurious items (washing machines, air travel, healthcare) often included in PPP baskets. The economist Robert C. Allen has attempted to solve this by using standardized baskets of goods typical of those bought by the poor across countries and historical time, for example including a fixed calorific quantity of the cheapest local grain (such as corn, rice, or oats).

Basic needs

The basic needs approach is one of the major approaches to the measurement of absolute poverty in developing countries. It attempts to define the absolute minimum resources necessary for long-term physical well-being, usually in terms of consumption goods. The poverty line is then defined as the amount of income required to satisfy those needs. The 'basic needs' approach was introduced by the International Labour Organization's World Employment Conference in 1976. "Perhaps the high point of the WEP was the World Employment Conference of 1976, which proposed the satisfaction of basic human needs as the overriding objective of national and international development policy. The basic needs approach to development was endorsed by governments and workers' and employers' organizations from all over the world. It influenced the programs and policies of major multilateral and bilateral development agencies, and was the precursor to the human development approach."

A traditional list of immediate "basic needs" is food (including water), shelter, and clothing. Many modern lists emphasize the minimum level of consumption of 'basic needs' of not just food, water, and shelter, but also sanitation, education, and health care. Different agencies use different lists.
According to a UN declaration that resulted from the World Summit on Social Development in Copenhagen in 1995, absolute 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."

David Gordon's paper, "Indicators of Poverty and Hunger", for the United Nations, further defines absolute poverty as the absence of any two of the following eight basic needs:

* Food: Body mass index must be above 16.
* Safe drinking water: Water must not come solely from rivers and ponds, and must be available nearby (fewer than 15 minutes' walk each way).
* Sanitation facilities: Toilets or latrines must be accessible in or near the home.
* Health: Treatment must be received for serious illnesses and pregnancy.
* Shelter: Homes must have fewer than four people living in each room. Floors must not be made of soil, mud, or clay.
* Education: Everyone must attend school or otherwise learn to read.
* Information: Everyone must have access to newspapers, radios, televisions, computers, or telephones at home.
* Access to services: This item is undefined by Gordon, but normally is used to indicate the complete panoply of education, health, legal, social, and financial (credit) services.

In 1978, Ghai investigated the literature that criticized the basic needs approach. Critics argued that the basic needs approach lacked scientific rigour; it was consumption-oriented and antigrowth. Some considered it to be "a recipe for perpetuating economic backwardness" and for giving the impression "that poverty elimination is all too easy". Amartya Sen focused on 'capabilities' rather than consumption.

In the development discourse, the basic needs model focuses on the measurement of what is believed to be an eradicable level of poverty.

Relative poverty

Relative poverty means low income relative to others in a country: for example, below 60% of the median income of people in that country.

Relative poverty measurements unlike absolute poverty measurements take the social economic environment of the people observed into consideration. It is based on the assumption that whether a person is considered poor depends on her/his income share relative to the income shares of other people who are living in the same economy. The threshold for relative poverty is considered to be at 50% of a country's median equivalised disposable income after social transfers. Thus, it can vary greatly from country to country even after adjusting for purchasing power standards (PPS).

A person can be poor in relative terms but not in absolute terms as the person might be able to meet her/his basic needs, but not be able to enjoy the same standards of living that other people in the same economy are enjoying. Relative poverty is thus a form of social exclusion that can for example affect peoples access to decent housing, education or job opportunities.

The relative poverty measure is used by the United Nations Development Program (UNDP), the United Nations Children's Fund (UNICEF), the