Absolute Poverty vs. Relative Poverty — What's the Difference?

Absolute Poverty is a fixed standard or threshold below which people are considered impoverished, regardless of their societal context. It typically refers to a minimum level of income required to sustain a certain quality of life. People falling below this threshold can't afford basic human needs, such as food, shelter, and clothing. On the other hand, Relative Poverty isn't about a specific threshold but rather about inequality. People in Relative Poverty earn significantly less than the average income in their society, making them relatively poorer. Their situation isn't necessarily about lacking basic needs, but about lagging behind the general standard of living in their environment.

In Absolute Poverty, standards are consistent and universal, often dictated by globally accepted measures. For example, the World Bank might define absolute poverty as living on less than $1.90 a day. Relative Poverty, conversely, is defined differently in every region or country based on its economic distribution. In wealthy countries, relative poverty might mean earning less than 50% of the median income, even if that income would be considered wealthy in another country.

The consequences of Absolute Poverty are often dire, encompassing hunger, lack of access to healthcare, and no shelter. People facing absolute poverty struggle with survival. Those in Relative Poverty, however, might have their basic needs met, but they face challenges accessing opportunities and amenities available to their peers. The effects are more related to social exclusion and relative deprivation.

Measuring Absolute Poverty is relatively straightforward, as it requires comparing individuals or households to a fixed threshold. Relative Poverty, however, requires assessing the entire income distribution of a region to find where someone falls. Both measures are crucial to understanding the multifaceted nature of poverty and designing interventions to alleviate it.