Understanding Poverty

Poverty is the state or condition of having little or no money, goods, or means of support; condition of being poor; indigence.
— Random House Kernerman Webster’s College Dictionary

This definition follows most people’s thinking. However, it doesn’t acknowledge the existence and distinction of the two different types of poverty….

  • Extreme poverty (also called deep poverty, abject poverty, absolute poverty, and destitution)
  • Relative poverty

Extreme Poverty

Extreme poverty is the complete lack of the means necessary to meet basic personal needs, such as food, clothing, and housing. The threshold at which extreme poverty is defined is always about the same, independent of the person’s permanent location or era.

In 2019, extreme poverty widely refers to an income below the international poverty line of $2.16 set by the World Bank. The vast majority of those living in extreme poverty reside in South Asia and Sub-Saharan Africa. As of 2018, it is estimated that the country with the most people living in extreme poverty is Nigeria, at 86 million.

In the past, the vast majority of the world population lived in conditions of extreme poverty. The percentage of the global population living in extreme poverty fell from over 80% in 1800 to 20% by 2015. Despite the significant number of individuals still living below the international poverty line, these figures represent significant progress for the international community, as they reflect a decrease of more than one billion people over 15 years.

Relative Poverty

Relative poverty is having a low income relative to others in a country. An example would be having to live on an income that is 60% below that of the median income of people in that country.

Relative poverty measurements, unlike extreme poverty measurements, considers the social economic environment of the people. The threshold for relative poverty is considered to be at 50% of a country‚Äôs median disposable income after social transfers. Thus, it can vary greatly from country to country even after adjusting for purchasing power standards.

A person can be poor in a relative term but not in an absolute term. The person might be able to meet their basic needs but it is not able to enjoy the same standard of living as other people in the same country. Relative poverty is thus a form of social exclusion that can effect peoples access to decent housing, education or job opportunities.

Relative poverty better reflects social exclusion and inequality of opportunity.

Once economic development has progressed beyond a certain minimum level, the rub of the poverty problem is not so much the effects of poverty in any absolute form but the effects of the contrast between the lives of the poor and the lives of those around them.

The problem of poverty in the industrialized nations today is a problem of relative poverty.

This post is the first of two posts on poverty.
The next post will address the Poverty Trap.

What are your thoughts on the two different types of poverty? Please use the comment section provided to share your thoughts … or experience.

If you prefer to contact me directly, feel free to email me at mbrown.ec@mail.com.

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Published by W. M. Brown

I am a retired U.S. expat living in Ecuador. I was a business owner for 32 years before retiring in 2012.

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