Definition
- Absolute poverty
- Absolute poverty is having an income below the level a person needs for a basic standard of living, such as food, clothing and shelter.
- Not to be confused with: Relative poverty
- Relative poverty is having an income below a set percentage of the median income in one's own country, so the line moves as incomes move.
Example
Can you think of an example of absolute poverty?
Median household income is £600 a week, so the relative poverty line is £360. A household on £340 is in relative poverty. If every income rises by 10 per cent while prices stay the same, the median becomes £660 and the line £396. The household now has £374: it can buy more than before and is still in relative poverty.
Test yourself
What is the difference between absolute poverty and relative poverty?
An absolute line is fixed in real terms; a relative line moves with the median income.