Income Poverty

DESPITE THE LACK OF international consensus regarding definitions of poverty, a focus on income poverty clearly restricts the discussion to economic well-being or the command over economic resources. In the narrower sense, then, income poverty refers to economic deprivation. The typical measures of income poverty (hereafter referred to as “poverty”) specify some minimum standard below which various family types are considered poor, that is, lacking adequate resources to meet basic needs. Most analytic definitions usually begin with food, clothing, and shelter as core components of basic needs. Some include a variety of other purchases, such as transportation, childcare, and reading materials. A major difficulty, therefore, involves what constitutes a meaningful definition of basic needs, which inevitably will be linked to certain value judgments.

Another important distinction concerns the difference between absolute poverty (or extreme poverty) and relative poverty. According to the Copenhagen Declaration of the World Summit for Social Development, absolute poverty refers to “a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education, and information.”

The World Bank has developed poverty thresholds equivalent to a few dollars a day in its research on developing nations in Africa and Asia. The approach reflects [Page 533]an absolute minimum standard of poverty below which human survival would be compromised.

While the above approach makes sense in studies of the developing world, there are obvious limitations as applied in other contexts. More specifically, what one considers basic needs can only be meaningfully defined relative to the standards of the society being studied. Someone reasonably well-off in terms of the prevailing standards of a developing country might be considered desperately poor in advanced industrial countries. As the socioeconomic and cultural contexts differ, the definitions of poverty will vary as well. Hence much comparative research relies upon the concept of relative poverty, meaning that those classified as poor achieve that status only if they fall below certain thresholds as compared with others in their society. Relative standards of poverty usually include measures such as income inequality or family income as a proportion of society's median income.

The measurement of poverty clearly depends upon how one conceptualizes poverty. Some analysts have set their poverty thresholds at relatively low levels by considering only the most basic physical needs necessary for short-term survival in their definitions. Others have set the bar much higher in pointing out that the long-term well-being of families implies much more than merely meeting their barest necessities, for there must be sufficient resources available to participate meaningfully in the relationships and customary behaviors typical of a particular society. In assessing poverty in developing countries, the dominant strategy has been to draw upon nationally representative surveys to calculate standardized household income or consumption, normalized for household size.

One of the best measures, which accounts for currency exchange rates and has been adjusted for inflation, is the Purchasing Power Parity (PPP) estimate for consumption that the World Bank's Data Group has produced. The commonly used figure of $1 per day represents a measure of extreme poverty in developing countries. Researchers using the measure have estimated that roughly 21 percent of the populations living in developing countries lived in extreme poverty in 2001, reflecting a significant decline as compared with two decades earlier. Converting the percentage to population figures reveals an absolute decline from 1.5 billion individuals living in extreme poverty in 1981 to 1.1 billion in 2001. In global population terms, one-third of the world's population lived in extreme poverty in 1981 as compared with roughly 18 percent 20 years later. Over the time span, sub-Saharan Africa has emerged as the world region with the highest incidence of extreme poverty (46.9 percent), which further accounts for 29 percent of the global population living in extreme poverty.

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