Because being poor differs dramatically across countries, experts have had a difficult time establishing concrete terms to discuss it. Since the publication of its Human Development Report (1997), the United Nations has defined poverty as the "denial of choices and opportunities most basic to human development—to lead a long, healthy, creative life and enjoy a decent standard of living, freedom, self-esteem, and the respect of others." This definition takes into account nearly all aspects of human experience—personal, political, social, and financial. Not all attempts to define the condition of being poor are as inclusive. More typically, the focus has been on the economic side of poverty—how much money people make compared with other people. Since the mid-1990s agencies have recognized that poverty affects more than a person's income and consumption habits, leading to expanded definitions—also called composite indicators—used by the United Nations, the World Bank, and others.
Absolute and Relative Poverty
The most common way for governments and organizations to explain poverty is to break it down into two facets: absolute poverty and relative poverty. In general, absolute poverty means that a person's basic subsistence needs (for food, clothing, and shelter) are not being met. Relative poverty, on the other hand, typically means that a person's needs are not being met in comparison to the rest of his or her society. Gordon M. Fisher, in "Is There Such a Thing as an Absolute Poverty Line over Time?" (http://www.census.gov/hhes/poverty/povmeas/papers/elastap4.html), offers this explanation of the two terms:
an absolute poverty line is one which is constructed as an estimate of families' minimum consumption needs; this is done without reference to the income or consumption levels of the general population. In the same context, a relative poverty line is one which is set as a fraction of the median or mean income or consumption of the population as a whole (generally with appropriate adjustments for family size).
In other words, the measurement of absolute poverty considers whether a family can afford a specified amount of goods and services that are necessary for basic living in the country, city, or village in which they live. The measurement of relative poverty compares a family's financial situation with that of the rest of the population group to which they belong.
At the United Nations World Summit for Social Development in 1995, the governments of 117 countries signed the Copenhagen Declaration, which defined absolute poverty in these terms:
Absolute poverty is a condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education, and information. It depends not only on income but also on access to social services.
In 1979 researcher Peter Townsend defined relative poverty as "the absence or inadequacy of those diets, amenities, standards, services, and activities which are
common or customary in society" (Poverty in the United Kingdom).
But as David Gordon and Paul Spicker, editors of The International Glossary on Poverty (Comparative Research Program on Poverty of the International Social Science Council, 1999), point out, much of the discussion of absolute versus relative poverty is a matter of semantics—people's interpretations of the meanings of words—when in reality the two concepts are more similar than different.
PROBLEMS WITH ABSOLUTE AND RELATIVE POVERTY DEFINITIONS
Critics say that the concepts of absolute and relative poverty are not objective and depend too heavily on individual judgments of what it means to be poor. Ivan P. Felligi, Chief Statistician of Canada, argued in On Poverty and Low Income (1997, http://www.statcan.ca/english/research/13F0027XIE/13F0027XIE.htm) that there really is no "internationally accepted" definition of poverty, largely because the international community has yet to agree on whether poverty should be defined and measured across countries or within them. Felligi noted that the idea of absolute poverty is particularly problematic: "Before anyone can calculate the minimum income needed to purchase the 'necessities' of life, they must decide what constitutes a 'necessity' in food, clothing, shelter, and a multitude of other purchases, from transportation to reading material." For example, a donkey might be a necessity for a family living in a remote village in Africa but would be useless to a family in an American inner city; a tent might be the ideal shelter for a nomadic family, whereas those who live in one place require a more permanent structure. In a city with adequate public transportation, a person would not necessarily need a car, but those living in rural areas might not have any other options for transportation.
Additionally, Felligi pointed out that definitions of poverty can change over time within a single country. Living conditions that were acceptable in previous centuries and even decades are now considered inhumane; everyone in the United States agrees that indoor plumbing and electricity are basic necessities, yet as recently as the mid-twentieth century these things were luxuries to many Americans. Similarly, according to Felligi, a person who is considered rich in one country might be seen as abysmally poor in a wealthier country.
Composite Poverty Indicators
Composite poverty indicators allow for a broader explanation and measurement of poverty because they take into account factors not directly related to a family's income or larger economic forces such as a country's gross domestic product (GDP; a country's total income and economic output). Although GDP is often used to measure a nation's standard of living (the availability of goods and services to a country's citizens), many experts contend that it is not an adequate way to explain poverty because it measures only the consumption of material goods.
Using composite poverty indicators allows those who study and track poverty to consider factors other than income and possessions, instead examining a person's overall quality of life.
THE HUMAN POVERTY INDEX
In its Human Development Report 1997 the United Nations Development Program added another element to the standard definitions of poverty: the Human Poverty Index (HPI). Rather than relying solely on the terms absolute and relative poverty, the UN Development Program uses the concepts of "income poverty" and "human poverty." Under income poverty fall the terms "extreme poverty" and "overall poverty." Extreme poverty is the inability to meet basic food needs, which are defined by minimum calorie requirements. Overall poverty is the inability to afford basic needs other than food, such as shelter, clothing, and energy, along with food. The concept of human poverty is further broken down into direct and indirect effects of poverty on human life. Direct effects of poverty on people include illiteracy, hunger and malnutrition, shortened life spans, illness or death from preventable diseases, and poor health of pregnant women and mothers. Indirect effects include a compromised or total lack of access to essentials such as energy, sanitation, clean drinking water, health care, transportation, and communication services.
The Human Poverty Index frequently is divided into two measures. HPI-1 is used to measure absolute poverty in less developed countries. Its variables are: the percentage of a population likely to die before the age of forty; the percentage of people over age fifteen who are illiterate; the percentage of children under age five who are underweight; and the percentage of people without access to public and private services such as health care and clean water.
HPI-2 is used to measure relative poverty in industrialized (more developed) countries. It focuses on the same variables as HPI-1, but with adjustments to the conditions of the poor living in wealthier countries. HPI-2 measures: the percentage of people likely to die before the age of sixty; the percentage of adults living with functional illiteracy (a degree of illiteracy that does not allow people to function at a basic level in reading and writing); and the proportion of people living with long-term unemployment and below the poverty line, which is set at 50% of the median disposable household income. Additionally, HPI-2 examines the social alienation that can accompany persistent unemployment and poverty.
OTHER COMPOSITE INDICATORS
Other commonly used composite poverty indicators are:
- The Human Suffering Index (HSI) ranks the levels of suffering experienced by poor people in the areas of life expectancy; calorie intake; supply of clean water; child immunization; enrollment in secondary school; per capita gross domestic product; inflation rate; access to communications systems; technological development; civil rights; and political freedoms.
- The Physical Quality of Life Index (PQLI) combines measurements of life expectancy, infant mortality, and literacy rates.
- The Human Development Index (HDI) measures poverty using a combination of life expectancy, literacy, and amount of education, along with the domestic purchasing power of GDP (how much citizens of a country are able to buy based on the country's gross domestic product). Like the Human Poverty Index, the Human Development Index was devised by the United Nations Development Program, but its purpose is to measure how well a country is progressing toward development, whereas the Human Poverty Index measures the level of poverty and suffering experienced in a country at any given time.
Poverty Measurements Used by the World Bank
The World Bank is an international organization of member nations whose goal is to reduce poverty and increase development in poor countries. It is divided into two distinct groups: the International Bank for Reconstruction and Development, which focuses on middle-income countries and those with good credit, and the International Development Association, with a focus on the very poorest countries, which may be deeply in debt to other nations. The World Bank provides lines of credit, loans, and grants so that poor countries can improve infrastructure (roads, bridges, waterways, etc.), communications, health care, and education.
Like many international institutions, the World Bank uses its own terminology to define and measure poverty:
Incidence of poverty: The percentage of a country's population that cannot afford basic necessities (a "basket of goods and services"). This is also known as living below the poverty line—an income level below which a person is unable to meet basic needs (see below for more information on poverty lines).
Depth of poverty: How far below the poverty line the poor population lives; also called the poverty gap.
Poverty severity: Measures how poor the poor are. In other words, poverty severity (also called the squared poverty gap) measures how far below the poverty line individuals and households are, with more consequence given to those at the very bottom.
VULNERABILITY TO POVERTY
An important facet of the World Bank's measurements is tracking how likely people are to fall into poverty or to fall deeper into poverty today. The World Bank Web site explains why keeping track of vulnerability to poverty matters: "Vulnerability may influence household behavior and coping strategies and is thus an important consideration for poverty reduction policies." For example, if a farmer and his or her family lives on the brink of poverty at any time, "The fear of bad weather conditions or the fear of being expelled from the land they cultivate can deter households from investing in more risky but higher productivity crops and affect their capacity to generate income." This fear and its resultant behaviors can influence the wider economy of the community and the nation, as a farmer who avoids planting high-yield crops might affect prices, consumers' buying habits, and the market overall.
According the World Bank, a number of incidents can trigger a descent into poverty, and these incidents can occur at several socioeconomic levels. At the individual level are unexpected events like major illnesses or deaths within the household, which can lead to financial ruin when medical bills cannot be paid or if it is the main breadwinner who becomes ill or dies. At the community level are things like environmental damage due to pollution that causes unsuitable working conditions or local social problems like rioting and crime. Larger trends at the macroeconomic level include national or international incidents like natural disasters and war, which also effect people's level of vulnerability to poverty. A family that is already experiencing financial instability can easily fall into poverty under any of these circumstances, and the more people there are living on the brink of poverty, the less stable the local, national, and international economies will be.
While vulnerability to poverty is difficult to measure and track, the World Bank uses such monetary indicators as income and consumption, as well as nonmonetary indicators like health status, weight (to determine whether minimum calorie requirements are being met), and how many financial and nonmonetary assets a person or family has.