Relative vs Absolute Poverty

Defining different types of poverty

What is Poverty?

In simple terms, poverty is not having enough money or access to resources to enjoy a decent standard of living; be that the lack of access to healthcare, education or water and sanitation facilities etc.

Historically, poverty in the UK was defined as either primary and secondary in studies by Seebhom Rowntree in the 20th century.

  • Primary poverty means not having enough money to meet basic needs. It can also be considered as ‘living below the poverty line.’
  • Secondary poverty is when people earn just enough money to afford the necessities. But, they spend part of it on “coping mechanisms” to deal with financial and work-related stress. (high risk and/or difficult working conditions due to abuse and long hours) and therefore end up struggling to make ends meet

In the end, Rowntree identified low wages as the main cause of poverty in the UK, rather than the poorest being responsible for their own condition – which was the most common criticism back then (and still is today to some extent).

Understanding the cycle of poverty

Statistics worldwide back this conclusion today, people born into poverty are much more likely to remain poor. Some people might escape it, but for the majority, hard work isn’t the solution when the economic system works against them. This is what constitutes the cycle of poverty.

Not having access to healthy food, decent housing, electricity, water means you effectively live in severe, absolute poverty. And the cost of these things is too high for you to afford them, or at least you can’t afford them all. So, which one do you prioritise?

That’s why finding a definition of relative or absolute poverty isn’t simple since it doesn’t just involve economics, but it is also affected by society and politics. For this reason is poverty a measurable concept? And if yes, should we measure it using a relative approach or an absolute one?

Housing poverty in Asia

What is relative vs. absolute poverty

Absolute poverty is when household income is below a certain level. This makes it impossible for the person or family to meet basic needs of life including food, shelter, safe drinking water, education, healthcare, etc.

In this state of poverty, even if the country is growing economically it has no effect on people living below the poverty line. Absolute poverty compares households based on a set income level. And this level varies from country to country depending on its overall economic conditions.

Relative poverty is when households receive 50% less than average household incomes. So they do have some money but still not enough money to afford anything above the basics. This type of poverty is, on the other hand, changeable depending on the economic growth of the country.

  • Relative poverty is sometimes described as “relative deprivation” because the people falling under this category are not living in total poverty. They are not, however, enjoying the same standard of life as everyone else in the country. It can be TV, internet, clean clothes, a safe home (a healthy environment, free from abuse or neglect), or even education.
  • Relative poverty can also be permanent. This means that certain families have absolutely no chance of enjoying the same standards of living as other people in the same society currently have access to. They are basically “trapped” in a low relative income box.

When the relative approach is used to measure poverty, there is another concept that needs to be explored – persistent poverty. This is when households receive 50 or 60% less income than average incomes every 2 out of 3 years. Since long-term poverty has more impactful consequences on economic and social conditions, persistent poverty is an important concept to bear in mind.

Relative poverty is a form of social exclusion

On the whole, poverty is about exclusion. In its most extreme form, it’s the inability to access what you need for a decent life. Relatively speaking, in more developed countries, it’s being excluded from what constitutes normal daily life:

  • Internet to access jobs or public services
  • The proper clothes to find that job
  • Paying for education
  • Access to decent housing (respiratory diseases is one of the most common symptoms of poor housing)

Relative poverty depends on the level of development of the country. It’s about giving everyone the chance to enjoy the same living standards so that everyone has an equal opportunity to live their life to their full potential. In that sense, fighting poverty is about unlocking huge, untapped economic potential within each country.

house in east Africa

How poverty is measured

To measure whether poverty is absolute or relative you first have to construct thresholds. You must also collate data to calculate the overall number of people who could be considered poor.

Then, when a relative approach is used, a (changeable) level of what households should be able to rely on in order to meet their basic needs is set. And anyone who falls below that is counted in this category.

The absolute method is set at a fixed level that does not change over time. There might be a huge gap between the current level of poverty and the historical standard when this approach is used. Absolute poverty is, therefore, losing its status in the world of economics. Especially in countries where the economy is growing and living standards are rising.

Since the relative approach to measuring poverty uses current data and statistics. It is considered a better and more useful approach. Relative poverty is the main measurement used today because in practice it indicates the number of households that have been “relatively” left behind. Left behind from the households that are currently enjoying a good standard of living.

Families in poverty Middle-East

However, unlike the relative method, the absolute approach helps us to determine whether incomes have increased over time or not. This being said, it does not link the condition with inequality or unfair distribution of resources.

It is for this reason that many economic experts throughout the world suggest that a hybrid approach should be used. Especially for the measurement of poverty in order to pinpoint areas where improvement is possible.

As stated at the beginning, you many think that poverty is simply not having enough money or access to resources to enjoy a decent standard of living, but when further exploring the types, reasons and solutions to do with poverty, you can see it all becomes much more complex.

This post was produced with the financial support of the European Union. Its contents are the sole responsibility of Habitat for Humanity GB and do not necessarily reflect the views of the European Union.

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