Different organizations and governments measure poverty differently. This makes it difficult to establish an understanding of which people should be categorized as poor. Below are some measurements that have been developed to set worldwide standards for the poverty line.
Absolute Poverty Measurement
This measurement refers to the amount of resources a person needs to maintain a minimum standard of living. The absolute poverty line can remain the same regardless of how much the overall standard of living or income distribution changes in a society. The World Bank’s poverty line of $1.25 worldwide is an example of an absolute poverty measurement.
Advantages: It allows for easy comparison between different countries.
Disadvantages: It does not always accurately represent the different costs of subsistence from country to country. It is simplistic and does not reflect indebtedness, health, education, housing or access to public services. Measurements do not take into account the amount of consecutive years people live under the poverty line.
Relative Poverty Measurement
This measurement refers to the living standard of a person relative to the rest of society, and changes as the standard of living in society shifts. Peter Townsend, a pioneering figure in defining relative poverty standards, defined people living in relative poverty as unable to “play the roles, participate in the relationships, and follow the customary behavior which is expected of them by virtue of their membership in society.” The EU calculates poverty using relative poverty measurements. Usually this means that people who earn only 40 to 70 percent of the average household income are categorized as under the poverty line.
Advantages: Reflects conditions in society at a specific time.
Disadvantages: It can give a skewed understanding of who lives in poverty, as people can be categorized as poor even if they are well-off simply because they have much less income relative to the rest of the population. It is simplistic and does not reflect indebtedness, health, education, housing or access to public services. Measurements do not take into account the amount of consecutive years people live under the poverty line.
Multidimensional Poverty Index
This measurement was established in 2010 to replace the Human Poverty Index of the United Nations Development program. It aimed to ameliorate the downsides of the absolute and relative poverty measurements. It measures poverty through three indicators: health, education level and standard of living. Each indicator has multiple sub-indicators. People are categorized as poor if they are deprived of more than a third of each indicator, while those who are deprived of half or more are in extreme poverty.
Advantages: The MPI allows measurements that can be compared accurately across different regions, countries, ethnic groups and other community characteristics.
Disadvantages: Measurements do not usually take into account the amount of consecutive years people live under the poverty line.
Sources: University of Pennsylvania, The European Anti-Poverty Network, Instituto Nacional De Estadistica, Oxford Poverty & Human Development, United Nations Development Program
Photo: United Nations Development Program