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What is the difference between absolute and relative poverty?

Relevant Topics

This question pertains to topics in Microeconomics and Macroeconomics, such as Economic Development and Income and Wealth Disparities.

Definitions:

Absolute Poverty: This refers to a condition where a person's income is not sufficient to meet a certain predetermined minimum level of basic necessities, such as food, housing, and clothing.

Relative Poverty: This refers to a situation where a person's income is a certain percentage less than the median income of the population.

Detailed Explanation:

Absolute poverty is a situation where individuals or families cannot afford basic necessities of life. This threshold is usually measured by a specific income figure, below which a person is considered to be in absolute poverty. This threshold does not change with the economic environment and remains the same across different countries.

On the other hand, relative poverty is not based on a fixed income figure. Instead, it is determined in relation to the economic status of other members of the society. A person is said to be in relative poverty if their income is significantly lower than the median income of their society. This level changes as the average income levels change, and it also varies from one country to another, reflecting economic conditions and societal norms.

Recent:

Absolute Poverty: According to the World Bank, as of 2019, about 9.2% of the world's population, or nearly 689 million people, lived on less than $1.90 a day, a common benchmark for global absolute poverty.

Relative Poverty:
In 2019/20, 14.5% of the UK population (around 7.7 million people) were in relative poverty after housing costs, as per the UK government's Department for Work and Pensions.

Summary:

In summary, absolute poverty refers to a situation where a person's income falls below a certain threshold necessary to meet basic needs, irrespective of the economic environment. In contrast, relative poverty refers to an economic condition where a person's income is significantly lower than the median income of their society, reflecting income inequality. Both measures highlight different aspects of economic deprivation and can inform policy decisions to combat poverty.

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