Absolute poor

What Is Absolute Poverty?

Absolute poverty refers to a condition where an individual or household lacks the minimum resources necessary for basic human needs and long-term physical well-being. This severe form of deprivation includes insufficient access to food, safe drinking water, sanitation facilities, healthcare, education, and shelter. Unlike other forms of deprivation, absolute poverty is measured against a fixed global standard, not against the living standards of a particular society. It is a critical concept within Global Economics and Development, providing a clear benchmark for identifying the most vulnerable populations worldwide. The concept of absolute poverty focuses on the fundamental requirements for survival and often underpins strategies aimed at improving the Standard of Living for the world's poorest.

History and Origin

The foundational concept of absolute poverty emerged in the 19th century, notably articulated by English social researcher Seebohm Rowntree. Rowntree introduced the idea of a "basket of goods" to define a minimum subsistence level, an approach that laid the groundwork for early measurements of deprivation¹⁰. His work sought to identify the income required to cover essential items, thereby establishing a fixed line below which individuals were considered to be in poverty.

In the late 20th century, international organizations began to formalize a global standard for absolute poverty. The World Bank, in 1990, established the first "dollar-a-day" international poverty line, aiming to provide a consistent metric across diverse economies. This line was initially derived by examining national poverty lines in some of the world's poorest countries and converting them to a common currency using Purchasing Power Parity (PPP) rates⁹. This initial line, set at approximately $1.00 per day (in 1985 prices), has been periodically updated to reflect global price changes and new data. Subsequent revisions led to lines such as $1.25, $1.90, and most recently, $2.15 per day (in 2017 PPP) as of September 2022⁸. The evolution of this global benchmark reflects ongoing efforts to accurately capture and combat extreme deprivation worldwide.⁷

Key Takeaways

• Fixed Standard: Absolute poverty is defined by a consistent, universal standard of deprivation, irrespective of the wealth or development level of a specific country.
• Basic Needs Focus: It centers on the inability to meet fundamental human requirements such as food, clean water, shelter, health, and education.
• International Measurement: The World Bank's International Poverty Line serves as a primary metric for identifying absolute poverty globally.
• Extreme Deprivation: Individuals living in absolute poverty often face severe health risks, limited life expectancy, and lack access to basic public services.
• Global Target: Eradicating absolute poverty is a central objective of international development efforts, including the United Nations' Sustainable Development Goals.

Formula and Calculation

Absolute poverty does not rely on a complex formula in the same way a financial ratio might. Instead, its "calculation" involves determining whether an individual's or household's income or consumption falls below a predefined threshold, known as an absolute Poverty Line.

For international comparisons, the primary method involves setting an International Poverty Line (IPL) based on the typical poverty lines of the world's poorest countries. This process heavily utilizes Purchasing Power Parity (PPP) conversion rates. PPP exchange rates adjust for differences in the cost of goods and services across countries, allowing for a more accurate comparison of living standards than traditional market exchange rates.

The current International Poverty Line, set by the World Bank at $2.15 per day (in 2017 PPP), signifies the income required to purchase a minimum set of basic necessities. If a person's daily income, adjusted for PPP, is below this threshold, they are considered to be living in absolute poverty.

Interpreting Absolute Poverty

Interpreting absolute poverty involves assessing an individual's or household's economic condition against a fixed, internationally recognized standard. When a person is categorized as living in absolute poverty, it signifies their inability to afford the Basic Needs for survival, regardless of the relative wealth of their surrounding society. This threshold is uniform across countries, allowing for direct comparisons of the extent of extreme deprivation worldwide.

For policymakers and humanitarian organizations, the absolute poverty measure is crucial. It helps in identifying populations facing the most severe Economic Inequality and enables targeted interventions aimed at providing immediate relief and fostering long-term development. While it highlights the most acute forms of deprivation, it does not capture broader aspects of well-being, which might be assessed by metrics like the Human Development Index.

Hypothetical Example

Consider a family of four, including two adults and two young children, living in a rural village in a developing nation. The adults work intermittently in agriculture, earning a combined average of $5 per day.

To determine if this family lives in absolute poverty, their daily income is compared against the International Poverty Line. As of 2022, the World Bank's IPL is $2.15 per person per day. For a family of four, the absolute poverty threshold would be ( $2.15 \times 4 = $8.60 ) per day.

Since this family earns $5 per day, which is below the $8.60 per day threshold, they are considered to be living in absolute poverty. This situation suggests they likely face severe challenges in securing enough food, accessing clean water, obtaining necessary healthcare, or providing adequate shelter. Their lack of regular, stable income prevents them from meeting their most fundamental needs, highlighting the urgent need for interventions such as targeted Financial Inclusion programs or Microfinance initiatives.

Practical Applications

The concept of absolute poverty is a cornerstone in global development and economic policy, serving several vital practical applications:

• Global Monitoring and Reporting: International bodies like the World Bank and the United Nations use the absolute poverty line to track and report on the scale of extreme deprivation worldwide. This data is essential for understanding global Economic Growth patterns and their impact on the most vulnerable.
• Targeting Development Aid: Governments and non-governmental organizations rely on absolute poverty data to identify the regions and populations most in need of assistance. This allows for the focused allocation of humanitarian aid, healthcare initiatives, and educational programs.
• Policy Formulation: The measurement of absolute poverty informs national and international policies aimed at poverty reduction. These policies often involve investments in infrastructure, improved access to basic services, and the implementation of Social Welfare Programs.
• Measuring Progress: The continued monitoring of absolute poverty rates provides a clear metric for evaluating the effectiveness of development interventions and progress towards global goals, such as the United Nations' goal to end poverty in all its forms everywhere⁶.

Limitations and Criticisms

While providing a crucial benchmark for severe deprivation, absolute poverty measures have several limitations and have faced criticism:

• Static Definition: A fixed absolute poverty line, though useful for international comparison, may not fully capture the evolving nature of minimum needs or the rising cost of living in different regions over time. What constitutes "basic needs" can be subjective and may change with technological and societal advancements⁵.
• Lack of Context: It does not account for the quality of services or goods available or the varying costs of living within countries, such as between urban and rural areas. This can obscure localized challenges even if overall Income Disparity is low.
• Exclusion of Non-Monetary Aspects: Absolute poverty primarily focuses on income or consumption and may not fully reflect other critical dimensions of well-being, such as access to justice, political freedom, or social inclusion. A person might be above the absolute income threshold but still experience severe deprivations in other areas.
• Data Collection Challenges: Accurately collecting income and consumption data, particularly in remote or informal economies, poses significant practical difficulties, potentially leading to underestimations or overestimations of the true extent of absolute poverty.
• Focus on Minimum, Not Well-being: Critics argue that while essential for identifying dire circumstances, focusing solely on absolute poverty might divert attention from the broader goal of improving overall well-being and reducing relative deprivation, which can still lead to significant social challenges even in countries with high Gross Domestic Product.⁴

Absolute Poverty vs. Relative Poverty

Absolute poverty and Relative Poverty are distinct concepts used to measure different aspects of economic deprivation. While both aim to understand poverty, their underlying definitions and implications differ significantly.

Confusion often arises because both terms describe a lack of resources. However, absolute poverty signifies a life-threatening absence of necessities, whereas relative poverty indicates a disadvantage compared to the majority of society, which can lead to social exclusion even if basic survival needs are met.

FAQs

Q1: What is the current international poverty line for absolute poverty?
The World Bank's current international poverty line for extreme absolute poverty is set at $2.15 per person per day, based on 2017 Purchasing Power Parity (PPP) values. This threshold is periodically updated to account for changes in prices across the Global Economy.³

Q2: Where is absolute poverty most prevalent today?
While global absolute poverty has seen significant reductions over the past few decades, it remains most prevalent in Sub-Saharan Africa. This region is home to a substantial majority of the world's population living below the international poverty line, facing persistent challenges related to economic development, conflict, and climate change.²

Q3: Is absolute poverty decreasing globally?
Yes, there has been a significant decline in global absolute poverty over the last few decades, largely due to strong Economic Growth in populous countries like China and India. However, progress has been uneven, and challenges persist, particularly in Sub-Saharan Africa and fragile states. Organizations continue to work towards further reductions.¹