# 9.6B: Measuring Poverty


Poverty is defined by deprivation, and can be measured with economic or social indicators.

Learning Objectives

• Compare the differences between absolute and relative poverty

## Key Points

• Economic measures of poverty include access to material needs, typically necessities such as food, clothing, shelter, and safe drinking water, measures of income, or measure of wealth.
• Social measures of poverty include access to information, education, health care, or political power.
• Absolute poverty refers to a fixed threshold based on access to income and material resources, while relative inequality is measured using a region’s median income and standard of living and therefore reflects income inequality.
• Relative poverty explains poverty as socially defined and dependent on social context. Usually, relative poverty is measured as the percentage of the population with income less than some fixed proportion of median income.

## Key Terms

• World Bank: A group of five financial organizations whose purpose is economic development and the elimination of poverty.
• absolute poverty: A measure of poverty based on a set standard that is consistent over time and between countries, referring to the ability of individuals or groups to meet their basic needs.
• relative poverty: A measure of wealth inequality, describing an individual or group’s wealth relative to an other individual or group.

Economic measures of poverty focus on material needs, typically including the necessities of daily living such as food, clothing, shelter, or safe drinking water. Poverty in this sense may be understood as a condition in which a person or community is lacking in the basic needs for a minimum standard of well-being, particularly as a result of a persistent lack of income.

Social measures of poverty may include lack of access to information, education, health care, or political power. Poverty may also be understood as an aspect of inequitable social relationships, experienced as social exclusion, dependency, and/or diminished capacity to participate in society.

According to the World Bank, definitions of poverty include low income and the inability to acquire the basic goods and services necessary for survival with dignity. Poverty also encompasses low levels of health and education, poor access to clean water and sanitation, inadequate physical security, lack of voice, and insufficient capacity and opportunity to better one’s life.

Poverty is usually measured as either absolute or relative poverty. Absolute poverty refers to a set standard which is consistent over time and between countries. The World Bank uses this definition of poverty to label extreme poverty as living on less than US $1.25 per day, and moderate poverty as less than$2 or \$5 a day.

Relative poverty explains poverty as socially defined and dependent on social context. Usually, relative poverty is measured as the percentage of the population with income less than some fixed proportion of median income. Relative poverty measures are used as official poverty rates in several developed countries and are measured according to several different income inequality metrics, including the Gini coefficient and the Theil Index. Measurements are usually based on a person’s yearly income and frequently take no account of total wealth.

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