Poverty can be defined in many different ways. Some attempt to reduce it to numbers, while others argue that a more ambiguous definition must be used. In the end, a combination of both methods is best. Today, most economists and social workers use two ways to define poverty.
Some people describe poverty as a lack of essential items – such as food, clothing, water, and shelter – needed for proper living. At the UN’s World Summit on Social Development, the ‘Copenhagen Declaration’ described poverty as “…a condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information.” When people are unable to eat, go to school, or have any access to health care, then they can be considered to be in poverty, regardless of their income.
While there are various numerically defined methods to measure and quantify poverty, two are simple enough that they are often used to define poverty (other methods are examined in the Measuring Poverty I and Measuring Poverty II sections of this site), relative poverty measurement and absolute poverty measurement. Both are based on income or consumption values making gathering information to compile statistics on poverty much easier.
Before absolute poverty measures can be used to define poverty, researchers must first determine if they want to measure income amounts or consumption amounts. Income refers to the amount of money someone makes, while consumption refers to the monetary value of the goods that person actually consumes. If you earn $4 a day, but are able, through other means, to consume $5 a day, then your yearly income would be $1,440, but your yearly consumption would only be $1,860. The differences can be significant, because depending on their situation poor people may be able to get goods for less. While it might appear at first glance that income and consumption are the same, closer examination reveals that income is just one factor, albeit a large one, which determines consumption amounts.
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Social Definitions of Poverty
Some people describe poverty as a lack of essential items – such as food, clothing, water, and shelter – needed for proper living. At the UN’s World Summit on Social Development, the ‘Copenhagen Declaration’ described poverty as “…a condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information.” When people are unable to eat, go to school, or have any access to health care, then they can be considered to be in poverty, regardless of their income.
Statistical Definitions of Poverty
While there are various numerically defined methods to measure and quantify poverty, two are simple enough that they are often used to define poverty (other methods are examined in the Measuring Poverty I and Measuring Poverty II sections of this site), relative poverty measurement and absolute poverty measurement. Both are based on income or consumption values making gathering information to compile statistics on poverty much easier.
Relative Poverty
Relative poverty measures are the simplest ways to determine the extent of poverty in individual countries. Using this method, the entire population is ranked in order of income per capita. The bottom 10% (or whatever percentage the government chooses to use) is then considered ‘poor’ or ‘impoverished.’ This can be fine for country-wide measurements, but it has some major drawbacks in global use. If, say, a 10% relative poverty measurement was applied in a global setting, it would appear that both an industrialized country, such as the U.S., and a sub-Saharan African country had the same 10% poverty rate, even though the conditions of the poor in sub-Saharan Africa are much worse than conditions in the U.S. For this reason, absolute poverty measures are more often used to define poverty on a global scale.
Income vs. Consumption
Before absolute poverty measures can be used to define poverty, researchers must first determine if they want to measure income amounts or consumption amounts. Income refers to the amount of money someone makes, while consumption refers to the monetary value of the goods that person actually consumes. If you earn $4 a day, but are able, through other means, to consume $5 a day, then your yearly income would be $1,440, but your yearly consumption would only be $1,860. The differences can be significant, because depending on their situation poor people may be able to get goods for less. While it might appear at first glance that income and consumption are the same, closer examination reveals that income is just one factor, albeit a large one, which determines consumption amounts.reference
