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July 3, 2013 / sociologytwynham

Absolute and relative poverty

Absolute poverty refers to a set standard which is the same in all countries  and which does not change over time.  An income-related example would be  living on less than $X per day.

Relative poverty refers to a standard which is  defined in terms of the society in which an individual lives and which therefore  differs between countries and over time.  An income-related example would  be living on less than X% of average UK income.

Absolute poverty and relative  poverty are both valid concepts.  The concept of absolute poverty is that  there are minimum standards below which no one anywhere in the world should  ever fall.  The concept of relative poverty is that, in a rich country such as  the UK, there are higher minimum standards below which no one should fall, and  that these standards should rise if and as the country becomes richer.

Absolute poverty

Clearly, where both absolute and relative poverty are prevalent, it is  absolute poverty which is (by far) the more serious issue.  This is the  case in much of the third world, where the focus is therefore on fixed income  thresholds (typically $1 or $2 a day, on the grounds that this is the minimum  needed for mere survival).  But in a UK setting, such thresholds have no import:  no one in the UK lives on incomes anywhere near this low.

So, logically,  either one concludes that there is no absolute poverty in the UK or that a much  higher threshold of absolute poverty than $1 or $2 per day should be used.

The view that there is no absolute poverty in the UK is a perfectly valid  position to take.

The view that there should be an absolute poverty threshold but that it  should be much higher than $1 or $2 per day begs the question about how such a  threshold should be defined and on what basis.

  • In the UK, the main efforts to define such thresholds have been undertaken under the general heading of ‘minimum income standards’, which basically estimate the level of income required to purchase a given basket of goods and services.  But the key point about such initiatives is that the basket of goods and services is defined according to the norms of the day and, as such, are inherently relative rather than absolute in nature.  So, for example, there would be many items in the ‘today’s basket’ that would not have been in the basket 50 years ago.  In other words, ‘minimum income standards’ relate to relative poverty rather than to absolute poverty.
  • In recent years, the Government has begun to describe households with less than half  1 the average 1997 household income (after adjusting for inflation) as being in ‘absolute poverty’.  This is, however, purely a political device – the only relevance of 1997 is that it is when the current Government came into power.   2  That is not to say that the statistic is unimportant, simply that it should not be described as ‘absolute poverty’.

To summarise: there is no obvious way of defining an absolute poverty threshold except the $1 or $2 a day thresholds defined on the grounds that this is the minimum needed for mere survival.  But in a UK setting, such thresholds have no import: no one in the UK lives on incomes anywhere near this low.

Relative poverty

The view that relative poverty is not important is a perfectly valid position  to take – it is just not the view that the authors of this website, along with  most other researchers, the EU, the UK government, and politicians of all hues  across the political spectrum take.  So, for example, the government’s  target of halving child poverty by 2010 is defined in terms of relative poverty.

The reason that we believe that relative poverty is important is because we  believe that no one should live with “resources that are so seriously below  those commanded by the average individual or family that they are, in effect,  excluded from ordinary living patterns, customs and activities.”  3  In other words, we believe that, in a rich country such as  the UK, there should be certain minimum standards below which no one should  fall.  4  And, as society becomes  richer, so norms change and the levels of income and resources that are  considered to be adequate rises.  Unless the poorest can keep up with  growth in average incomes, they will progressively become more excluded from the  opportunities that the rest of society enjoys.  If substantial numbers of people  do fall below such minimum standards then, not only are they excluded from  ordinary living patterns, but it demeans the rest of us and reduces overall  social cohesion in our society.  It is also needless.

If one accepts that relative poverty is important in principle, then the  obvious issue arises of what thresholds to use and on what basis.  This is  discussed in detail on the page on  choices of low-income threshold.  Our basic answer is that it does not  matter, so long as the thresholds are defined in relation to contemporary  average (median) income and are for households rather than individuals.  It  is for this reason that the main indicators on this website use a variety of  thresholds, so that a fuller picture of trends can be developed.  But, for  reasons of consistency and clarity, there has to be a ‘headline’ threshold and,  for this, we use the same threshold as both the UK government and the EU, namely  a household income of less than 60% of contemporary median household income.

Some people criticise the concept of relative poverty on the grounds that it  is to do with ‘inequality’ rather than ‘poverty’.  At one level, this is  simply an issue of semantics – because of the potential confusion between  ‘absolute poverty in the third world’ and ‘relative poverty in the UK’, we are  also not very comfortable with the phrase ‘relative poverty’ and this is why we  use the more descriptive ‘in low-income households’ throughout this website.

But at another level, the criticism is simply confused: whilst ‘inequality’  is about differences in income across the whole of the income distribution,  ‘relative poverty’ is about the number of people who have incomes a long way  below those of people in the middle of the income distribution.  These two  things are very different.  For example, whilst there will inevitably  always be inequality, there is no logical or arithmetic reason why there should  always be people in relative poverty.

To summarise: whether one believes that relative poverty is important or not  is a matter of opinion, but all political parties in the UK believe that it is  important and so do we.  There are well-established ways of measuring the  extent of relative poverty and it is these methods to which this website  adheres.

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1. More precisely, less than 60% of median, which is a similar amount of money.
2. Indeed, we once heard a government minister argue that the poverty threshold should be fixed at the beginning of each term of office and then suddenly jump at the start of the next term of office before being fixed again.  In that way, every government could say that it was reducing poverty even though levels of poverty never actually fell!
3. The definition of relative poverty as articulated by  Professor Peter Townsend, the leading authority of the last fifty years on UK  poverty.
4. Webster’s dictionary definition of the word  ‘poverty’ is “the state of one who lacks a usual or socially acceptable amount  of money or material possessions”.
All the above is taken from http://www.poverty.org.uk
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