Direct and Indirect Measures of Poverty

POVERTY CAN BE considered a special case of the measurement of well-being. The Concise Oxford Dictionary explains the adjective poor as a state of “lacking money or means to live comfortably,” and the noun poverty is defined as the state of being poor and as “want of the necessities of life.” Consequently, poverty and the poor had to be analyzed within the state of want, with deprivation that is related to the necessities of life. In general, poverty also can be defined as living below some threshold of the distribution of welfare. This, on the other hand, brings poverty close to the concept of inequality. The inequality implies that at the bottom of the welfare distribution a certain level of deprivation exists. That particular level of welfare is referred to as the poverty threshold in the literature, and has a central place in definitions and measurement of poverty.

There are two principal issues surrounding the measurement of poverty. First, we need to establish what kind of poverty we are attempting to measure, and second, we need to choose what kind of measures of poverty we are going to use.

Similarly there are at least two rivaling approaches in poverty research: absolute poverty and relative poverty. Arguably, these unidimensional approaches reflect the stages in historical development of poverty measurement. Recently, three additional approaches emerged in the literature on poverty: relative deprivation, multidimensional, and dynamic approaches.

The measurement of poverty started in the early 20th century with the use of an absolute-income threshold for buying food of minimum nutrition. In his pioneering study (Poverty: A Study in Town Life) in the city of York, England, Seebohm Rowntree, by conceptualizing poverty as the minimum physiological capability to function, laid the foundation for the absolute poverty approach. Within this approach poverty is perceived as living under the minimum below which physical efficiency could not be maintained, and it is that minimum rather than the way of living that separates the poor from the nonpoor. In his Poverty and Famines, Amartya Sen elaborated the very basics of the absolute concept of poverty. According to Sen, there is a core of absolute deprivation that results in starvation, malnutrition, and visible hardship.

The U.S. Bureau of the Census poverty threshold is considered an absolute threshold. The dollar amount threshold was originally estimated from the cost of a minimum food basket multiplied by three (since it was estimated that an average family spends a third of its income on food).

In 1992 the Census Bureau defined the poverty line as $6,932 for a single-person household and as $13,924 for a four-person household. The U.S. poverty threshold has been criticized for neglecting the rise in the general standard of living, regional differences, noncash benefits, and other factors. Nevertheless, the Census Bureau threshold remains the single poverty measurement in the United States.

In Europe, in contrast to the United States, poverty has been increasingly conceptualized in relative terms. Peter Townsend, the principal advocate of the relative concept of poverty, emphasizes the fact that necessities of life are not fixed; rather these are continuously adopted and augmented and socially and historically determined (Poverty in the United Kingdom). Consequently, attention has been shifted from an absolute threshold to examining the situation when resources fall far below an average level of income. This approach implies that poverty is more a function of income.

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