How poor is poor?

August 4, 2009

Is poverty not having enough or not having enough in comparison with what other people have?

Is it absolute or relative?

The notion of relative poverty has driven a lot of social and economic policy.

It was one of the motivations behind Working for Families. The television advertisements clearly showed the money was directed at people who already had luxuries and turned middle and upper income families into beneficiaries.

Defining policy by comparison with what others have is a flawed concept because as Michael Blasland points out on the BBC website, poverty, by this measure,  could decline during the recession.

That doesn’t mean poor people will have more, they could well have less, but richer people will have reduced incomes too. Relative poverty is defined as less than 60% of the median income, if rich people get poorer the median income would decrease and therefore fewer people would be poor.

The column includes an interactive graph which illustrates just how flawed this definition of poverty is.

Hat Tip: Liberty Scott


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