What is Poverty
What is Poverty
Poverty: Meaning, Causes, and Measure, Where the Poor Live?
Poverty: Meaning, Causes, and Measure
By James Chen (Investopedia)
The term poverty refers to the state or condition in which people or communities lack the financial resources and other essentials for a minimum standard of living. As such, they cannot meet their basic human needs.
People and families who live in poverty may go without proper housing, clean water, healthy food, and medical attention. Each nation may have its own criteria for determining the poverty line and counting how many of its people live in poverty.
Poverty is a socioeconomic condition that is the result of multiple factors—not just income. These factors include race, sexual identity, sexual orientation, and access to education, among others.
Understanding Poverty
Poverty refers to the lack of adequate financial resources such that individuals, households, and entire communities don't have the means to subsist or to acquire the basic necessities for a flourishing life. This absence of means can result in struggles to obtain food, clothing, shelter, and medicine.
Poverty is both an individual concern as well as a broader social problem. At the individual or household level, not being able to make ends meet can lead to a range of social, physical, and mental issues. At the societal level, high poverty rates can be a damper on economic growth and be associated with problems like crime, unemployment, urban decay, poor education, and poor public health.
Governments often put social welfare programs in place to help lift individuals, families, and communities out of poverty. Some countries have stronger welfare states (social safety nets) than others. For instance, the United States tends to be much more individualistic and has relatively limited welfare programs. European countries, in comparison, have a much broader range of welfare programs and supports for those in need.
Global Poverty
Poverty has decreased in developed countries since the Industrial Revolution. Increased production reduced the cost of goods, making them more affordable, while advancements in agriculture increased crop yields, as well as food production.
The international poverty line is a monetary threshold under which an individual is considered to be living in poverty. This figure is calculated by taking the poverty threshold from each country—given the value of the goods needed to sustain one adult—and converting it into U.S. dollars. The current international poverty line is $2.15 per day.
Many people around the globe still struggle to make ends meet. According to the World Bank, an estimated 700.6 million people lived in extreme poverty in September 2023.
It's estimated that more than 40% of the world's population lives in poverty, with the U.S. scoring the worst among developed nations. According to a report published in the journal Frontiers in Public Health, communities of color are more susceptible to poverty because of "racist notions of racial inferiority and frequent denial of the structural forms of racism and classism" globally and within the U.S.
What Causes Poverty?
Poverty is a difficult cycle to break and can pass from one generation to the next. It is often determined by socioeconomic status, ethnicity, gender, and geography.
Read more here.
Where the Poor Live?
By Samuel Kofi Tetteh Baah, Dean Mitchell Jolliffe, Christoph Lakner and Daniel Gerszon Mahler (The World Bank)
The world has experienced substantial but uneven progress in poverty reduction over the past three decades. In 1990, at least half of the people in East Asia, South Asia, and Sub-Saharan Africa were living in extreme poverty. However, the pace of poverty reduction since then has been quite different across regions. In 2019 the estimated rates of extreme poverty in these three regions were 1 percent (East Asia), 9 percent (South Asia), and 35 percent (Sub-Saharan Africa). It implies a stark change in the distribution of global poverty over time, which is to be considered when allocating resources among regions to end global poverty.
The world has seen significant transformations in its demographic and economic structures in recent times. In 2022, the world’s population surpassed 8 billion for the first time and, this year, India (a lower-middle-income country) has overtaken China (an upper-middle-income country) as the world’s most populous country. About 57 percent of the world population was living in low-income countries in 1990, whereas only 9 percent of the world population is now living in low-income countries. In fact, population growth and income status are highly correlated, and their interaction may result in differences in the definitions of poverty across countries and over time.
As countries evolve from low to high levels of development, the concept of poverty tends to shift gradually from absolute poverty to relative poverty. Absolute poverty captures deprivations in basic needs, such as food, clothing, and shelter, and absolute measures of poverty are fixed in real terms across time and space. Relative poverty accounts for the lack of resources to participate adequately in one’s society as it progresses. Measures of relative poverty are defined in relation to a typical measure of economic well-being (e.g., having a disposable income less than 60% of the median in the OECD).
Beyond the satisfaction of basic needs, an individual would still feel poor if they are unable to afford a decent lifestyle expected of them in the society in which they live. Relative poverty, therefore, also captures inequality. More recently, societal poverty has been conceptualized as a middle ground for defining poverty, capturing both absolute and relative notions of poverty (see Ravallion and Chen (2011), World Bank (2018) and Jolliffe and Prydz (2021) for more details). These three ways of measuring poverty are discussed below.
The World Bank has official poverty lines that reflect these different concepts of poverty. These include $2.15, $3.65, $6.85, and max ($2.15, $1.15 + 50% of median consumption or income), all expressed in the 2017 PPP. The first three lines are the absolute poverty lines typical of low-, lower-middle-, and upper-middle-income countries, respectively.
As the income status of a country increases, so does its national poverty line, reflecting the relative concept of poverty. The societal poverty line incorporates both absolute and relative concepts of poverty. See Jolliffe ⓡ al. (2022) for the technical analysis underpinning all these poverty lines of the World Bank.
The question of where the world’s poor live is a tricky one, because it depends on the poverty line being used to measure poverty across countries and not all countries are at the same level of development in any given year.
The international poverty line: a measure of absolute poverty
The international poverty line, currently set at $2.15, is the standard metric for monitoring extreme poverty in the world. This standard is based on the poverty lines used in the poorest countries of the world, which are often set to reflect the budget necessary to afford enough food to meet basic daily caloric needs.
If an individual lives on less than $2.15 a day, they are counted as living in extreme poverty. Based on this line, the distribution of global poverty has changed significantly between 1990 and 2019.
In 1990, fifty-three percent of the world’s population living in extreme poverty were in East Asia alone and 14 percent in Sub-Saharan Africa, behind East Asia and South Asia. In 2019, only about 4 percent of the world’s population in extreme poverty lived in East Asia. The burden of extreme poverty has shifted from East Asia to Sub-Saharan Africa, where about 60 percent of the extreme poor were living in 2019. Progress in poverty reduction in East Asia was so impressive that by 2003, South Asia became the region with the largest share of the world’s extreme poor. By 2007, Sub-Saharan Africa became second after South Asia. Sub-Saharan Africa has since 2011 been the region with the largest and growing share of the world’s extreme poor.
Income-group-specific poverty line: a measure of relative poverty
National poverty lines tend to increase with economic growth and richer countries tend to have higher poverty lines, even after taking into account differences in relative prices. This pattern is consistent with the principle of non-satiation. As income increases, the commodities people need for a meaningful life often increase.
A one-week vacation would be a luxury in a low-income setting, but is one of the indicators in the European Union’s material deprivation index and is therefore considered a necessity in this group of high-income countries.
To account for this variation in needs across space and time, an income-group-specific poverty line could be defined that varies across countries over time, as they change income status. For each year, a country will be assigned the poverty line corresponding to its income status.
China was a low-income country in 1998, graduated into a lower-middle-income status in 1999 and further graduated to an upper-middle-income country in 2010. Using an income-group-specific poverty line for poverty assessment would mean that poverty in China will be measured using $2.15 in 1998, $3.65 in 1999, and $6.85 in 2010. Having always been a low-income country, Burundi will be assigned the international poverty line of $2.15 for all years.
Read more here.