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.
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.
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.