Relative vs Absolute Poverty: Why and How To Measure Poverty

Absolute or extreme poverty?

What's the difference between absolute and extreme poverty? Well, extreme poverty generally refers to a poverty line. It's a definition of the amount of income one needs to satisfy the most basic needs: absolute needs (food, shelter) plus health care, education and specific needs depending on where people live (e.g. Alaska vs Sahara).

For example, urban residents of capital cities will have greater education, energy and transportation costs than populations elsewhere. People living in extreme poverty risk from marginalization to malnutrition and disease infections.

All this causes health issues which shorten people's lifespan in the long term - undoubtedly one of the most striking effects of poverty. Here's a great video on the numbers of poverty-related deaths, the difference between absolute and relative poverty and what we can do about them.

United Nations vs World Bank

Poverty is multifaceted

According to the United Nations Development Program (UNDP), poverty is not a one-dimensional phenomenon (e.g. "only" a lack of money) but a multidimensional issue that requires a wide range of solutions for a wide range of problems. This definition is supported by that of the World Bank which recognizes that poverty results from several political, social and economical processes that interact in ways to make people’s living conditions worse and worse.

However the two organizations have very different approaches of poorness. The UN actually tries to define and give numbers that reflect such diverse reality by creating measures such as the HDI (Human Development Index) that takes into account health and education. The World Bank has a more bizarre approach in that, despite it recognizes that poverty is a multidimensional problem, yet, it sticks to a one-dimensional monetary method. You have (a bit of) money: okay; no money: poor.

But many situations prove this over-simplification dangerous (see... rest of the website!). Sometimes the lack of money is due to contaminated water that brings diseases. Not everything is solely related to money.

Nevertheless both institutions recognize the same strategies to eliminate absolute poverty. They both propose the same remedies, such as good governance underpinned by a democratic and decentralized system, and opportunities characterized by market liberalization and economic growth.

Where politics kicks in

The problem is that these cures are rarely clearly understood (« Why would democracy in itself spur economic growth in my country, while China is doing better? ») or convincingly explained. Do we really need to bring politics in the debate of extreme poverty? Many countries over time have shown they could eliminate the most extreme poverty without being either the most advanced or progressive ones.

Absolute poverty lines: an aberration

A contrasted decline in poverty

There is no questioning that extreme poverty has declined over the past 20 to 30 years worldwide in general. But this overall trend hides regional differences.

The truth is that, as China started its opening and modernization in 1978, it has been the major reason for this decline. The country lifted some 200 to 300 million people out of absolute poverty from the 1980s to the early 2000s. Apart from China, then, the truth is that you won’t find much progress at all, if not some increases in poverty in a few sub-Saharan countries.

Better times ahead? The rise of relative poverty

Since 2000 however things finally started to look better, except that the statistics on the extent of urban poverty are totally biased and don't count millions of people. A new kind of poverty – a relative one – has risen, hidden in the shade of the successful fight against absolute poverty. As you can see everything is intertwined: statistics, definitions, lines etc… Political motives but also lack of rigorous and consistent monitoring play are the main problems causing this bias.

Corrupt poverty lines

Poverty lines like the World Bank’s 1$-a-day line are used to set a level below which people are considered to be in extreme poverty. However, everywhere in the world governments have come up with their own absolute poverty lines. Why would they do that? This shows two things:

1. The governments want to manipulate the numbers;
2. Either they don’t trust the World Bank’s poverty line, or this one is irrelevant to them.

As shown in the articles on poverty stats and poverty line, both a) and b) are true. The more countries are developed and the more they suffer huge inequalities in the population, the more this kind of absolute poverty line is irrelevant. In any country of the world, what you get for $1 a day is radically different, even among the poorest ones, even among a single country (e.g. urban vs rural residents).

Is absolute poverty always relative?

Perceptions of pain, harm and suffering vary across cultures. Some rich populations have a thing for cold showers or consider not using warm water as a way of saving energy rather than a characteristic of absolute poverty.

Others purposely eat less than the recommended 2000 calories per day because they believe it is healthier for their bodies or souls. And some people absolutely don’t mind living in rooms crowded with family members or friends without thinking it’s a problem. End of line: absolute poverty is challenged by different conceptions of what basic needs are. From this angle, consensus on what absolute poverty is seems impossible.

Definition of absolute poverty - by instinct

If the definition of poverty showed that the phenomenon is not only a biological problem but in essence a context-bound one depending on the ability to fully participate in a society, several academics such as the famous Amartya Sen (1981) have always been looking for an “irreducible core of absolute deprivation”, one unquestionably obvious when observing a human being suffering from hunger, or any “visible hardship”.

Indeed, no matter what culture we’re talking about, we are all able to identify poverty, destitution and suffering by instinct. Hence we can start seeing how absolute and relative poverty are different. The true interest of the debate is in fact to define what a people’s needs are (as opposed to what they want), and whether they are uniform across the globe.

Basic needs - a matter of life and death

The challenge of defining basic needs has been quite the same as that of defining absolute poverty, because everything becomes relative if the concept is pushed far enough. However, by considering basic needs as an absence of major harm, researchers started asking the right questions. From then, many experts have started to claim that mortality (death rates) should have a central place as a measure of poverty. You can’t get more down to earth than that!

But it’s not just about being alive, it’s about life expectancy. How long you can live and how much you can achieve during that time. Sixty years ago, after World War II, life expectancy in a good number of countries was around 30-35 years on average. That does sounds like a good reflection of absolute poverty.

The ethical poverty line

In a research article, Peter Edward (2006) introduces the concept of ethical poverty line that aims to give a more realistic and moral account of absolute poverty. In his research he obtains an “EPL” (ethical poverty line) at a very minimum of $1.9 a day (twice that of the World Bank before it finally updated its poverty line). He also notes that a good number of developing countries use even higher poverty lines.

While this puts 2.5 billion people in the world (40% of the population) into the count of poverty, his Global EPL set at $2.7 a day would consider that nearly half of the world population lives in poverty.

Can the 1% richest save the world?

In his study Edward (2006) observes that it is true that to remove extreme poverty, we would only need “a 30% global tax on the consumption of roughly the richest 1% of the world, affecting one in 10 people in the USA and one in 20 in the UK”. But he shows that this “common misrepresentation” of poverty makes you think the very rich of developed countries are exclusively responsible for the state of extreme poverty on earth.

The reality is rarely that simple, for example the CEOs of Google or Facebook have probably nothing to do with poverty, but those of companies using sweatshops to produce running shoes or smartphones might want to rethink their strategy. They do create jobs but they also create conditions for exploitation of cheap labor that are akin to modern slavery. But even then, isn’t it the market and average consumers in richer countries who push for always cheaper products of increasingly better quality? The problem is, as Edward puts it, definitely not “confined to the very rich”.

A global tax to fight poverty

If we were to use a global tax to lift everyone living on less than $2 dollars/day, this would mean that “half the US population and one in three people in the UK” would have to give away 30% of their income. Plus the same proportions in other countries in the rest of the world (at equal income). Worse, if you were to use his global ethical poverty line, 4/5 of the US population and ¾ of the UK population would be concerned by the 30% global tax on income (plus the normal taxes).

You now understand that trying to eradicate “real” poverty through such strategy would greatly impair the situation of middle and low-middle classes of developed countries, which are often just safe from precariousness, no more no less, and often quite indebted as well. Obviously this is politically inconceivable, unless your dream is to never be elected again. Let's be realistic, no country will vote for a program that will cause its own citizen to lose so much money. In many European countries it would mean that citizens would be taxed up to 70% of their income which is completely absurd.

The only way out - justice and a fair system

Rather than thinking in terms of who should pay what to eliminate extreme poverty, it’s better to think about how to implement better development programs for the countries and regions affected by such state of destitution.

Of course the Edward’s study highlights the responsibility of the developed world at large, but a moral solution lies in nothing else than improving the fairness of the world economy’s mechanisms. Too often, developed countries have argued for free trade agreements on areas that benefited them. On the other hand they never stopped protecting the sectors – agriculture in particular – that would have helped the poorer countries to develop their economies and reduce poverty.

Capitalism, consumerism and world poverty

Given the level of consumption in middle and upper classes in many developed countries, an ethical approach of poverty is far from becoming reality. This is not about recycling anymore, but also about a better use of what people buy.

Extreme levels of consumption also contribute to put a strain on impoverished workers worldwide through intensive production. Throwing away your cell phone after only 6 months or a year while it can work easily 4 years (it's socially unacceptable to keep it that long though), replacing your fridge after a year because the new one can tell you what’s inside (the door is so heavy, I'll give you that) or it can order food on the Internet, etc, etc… This is the point of convergence between poverty and environment, as massively producing all the tons and tons of goods needed also put a strain on the planet’s resources and raise pollution levels.

Absolute or relative: which poverty line should we use?

Considering the progress made in richer countries in terms of access to technology, health care, housing etc, it makes more sense to apply relative poverty lines to such countries. That's because the populations there need access to more services (internet, information on politics, jobs, health, banking) in order to be part of their society.

For the much poorer countries though, an absolute approach of poverty seems necessary, at least to ensure that the most basic needs are addressed. And that issues of ethical and moral well-being are tackled too (e.g. exploitation, slavery, child labor).

Universal definition of absolute poverty

A universal characteristic of absolute poverty is the state of health and life expectancy. This is very easy to compare from country to country and tells a lot about people's lives.

Therefore it makes sense to give health and mortality a great importance in setting ethical poverty lines. This allows experts to ask why, for example, citizens of many sub-Saharan countries often don’t live long after 50 years old, while in most other countries on earth people’s life expectancy is above 65 years old on average.

Beyond poverty and about well-being

There's a much more sensitive question that goes beyond the problem of extreme poverty. It's that of how much do people need in order to live up to the average of 75 years old (e.g. in rich countries)?

How is it possible that many people in developing countries often live just as long as the people of much richer countries, who have access to much more goods and services?

Most likely, this problem will never be addressed but it asks the question of whether certain populations in the richer world are consuming more resources than they need. Of course, rich over-consuming people have always existed since the beginning of human civilization. It’s more interesting nonetheless to note that it’s the first time in History that so many people have access to so many resources and goods.

And it’s worth asking what this means about our system - whether it's sustainable - and our lifestyles (everybody wants to be rich after all). If you want to know more about the problem, see this article about statistics on hunger and absolute poverty.

REFERENCES

• Header image courtesy of Zoriah
• Absolute Poverty Measures for the Developing World, Shaohua Chen and Martin Ravallion, Proceedings of the National Academy of Sciences (USA) 2007
• Handbook on Poverty Statistics: Concepts, Methods and Policy Use, United Nations 2005
• The Ethical Poverty Line: A Moral Quantification of Absolute Poverty, Peter Edward, Third World Quarterly 2006
• Basic Needs and Basic Capabilities, Sabina Alkire, Valuing Freedoms, Sen's Capability Approach and Poverty Reduction 2002
• Extreme Poverty: An Obligation Ignored: Breaking The Cycle Between Poverty And Ill Health Needs Multisectoral Action, John Kevany, British Medical Journal 1996
• Obligations of Justice and Beneficence to Aid the Severely Poor, Elizabeth Ashford, Giving Well, The Ethics of Philanthropy 2011
• On Comparing Distributions of Poverty Gaps, Bruce D. Spencer and Stephen Fisher, Sankhyā: The Indian Journal of Statistics 1992
• Poverty as an Everyday State of Exception, Julie A. Nice, Accumulating Insecurity: Violence and Dispossession in the Making of Everyday Life 2011
• Poverty Comparisons with Absolute Poverty Lines Estimated from Survey Data, Kenneth Simler, Review of Income and Wealth 2007
• Poverty Concentration Measures and the Urban Underclass, Richard Greene, Economic Geography 1991
• Paths to Homelessness: Extreme Poverty and the Urban Housing Crisis, Doug A.Timmer ; D. Stanley Eitzen ; Kathryn D. Talley, Annals of the American Academy of Political and Social Science 1996
• Everyday Banality in a Documentary by Teenage Women: Between the Trivial and the Extreme. Schooling and Desiring in Contexts of Extreme Urban Poverty, Silvia Grinberg, Gender and Education 2010
• The Disparate Impact of Metropolitan Economic Change: The Growth of Extreme Poverty Neighborhoods, 1970-1990, John B. Strait, Economic Geography 2001
• The Rise of Advanced Marginality: Notes on Its Nature and Implications, Loïc J. D. Wacquant, Acta Sociologica 1996

‍