Absolute Poverty and Relative Poverty

Economy and Finance

Absolute Poverty and Relative Poverty

19 Jul 2023 Zinkpot 316

Absolute poverty is a financial condition where an individual or a family does not make enough money to meet their fundamental human needs, like shelter, food, clothing education, and basic medical care.
It is measured using the poverty line and income or expenditure level is considered in absolute poverty.
In this kind of poverty, the quality of life is extremely poor. This kind of poverty cannot be eradicated completely.
Absolute poverty takes into consideration only basic financial requirements. It fails to consider the people’s recreational psychological, social, and cultural needs. It completely ignores living standards and overall socioeconomic disparity.
Extreme poverty is estimated to have declined 12.3 percentage points between 2011 to 2019 in India. It was 22.5% in 2011 and it came down to 10.2% in 2019. The decline in rural areas was much higher than in urban areas.
It is the poverty defined in comparison to other people standing in the economy. Relative poverty is the circumstance in which individuals are deprived of the bare minimum of income required to sustain the average standard of living in the society in which they are living.
It can also be defined as poverty which is estimated when households receive 50% (or 60% in some countries) less than average household incomes.
Lorenz curve and Gini coefficient help to measure poverty in a relative sense.
Relative poverty is sometimes described as ‘relative deprivation’ because the people falling under this category are not living in total poverty. They are not, however, enjoying the same standard of life as everyone else in the country. It can be TV, Internet, clean clothes, a safe home, or even education. It is basically a form of social exclusion.
Relative poverty depends on the level of development of the country. It is changeable depending on the economic growth of the country.