Absolute poverty is not having enough for basic needs; relative poverty is being poor compared with others in the same society.
Absolute poverty means not having enough income to meet basic needs: food, clean water, a home, clothes and basic health care. The World Bank uses a poverty line of a few dollars a day to count people in extreme poverty around the world.
Relative poverty means having much less than the typical person in your own society. A common measure is an income below 60% of the median income in that country.
Relative poverty depends on the society. Someone in relative poverty in a rich country may have a home and enough food. But they cannot afford things most people there take for granted.
Growth can cut absolute poverty. But relative poverty can stay high if most of the gains go to the rich.
- Absolute poverty
- Cannot meet basic needs.
- Relative poverty
- Income well below the typical level in that society, e.g. below 60% of median.
Worked example: Telling them apart
Classify each situation.
- A family in a rural area cannot afford enough food or clean water: absolute poverty.
- A family in a rich city can afford basics but not internet access, school trips or holidays that most families have: relative poverty.
- If incomes double for everyone, absolute poverty falls, but relative poverty may not change, because the gap stays.
Watch out for this
There is no poverty in rich countries.
Rich countries have little absolute poverty but can have significant relative poverty, where some households have far less than most.
Check your understanding
A household's income is well below the national average, but it can afford food and shelter. What is it experiencing?
- Relative poverty
- Absolute poverty
- No poverty