Poverty line

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While global economy has helped financial wealth soar for a few, unfair trade, competitiveness and debt-based finance are making more and more people poorer. Globalization has widened the gap between the “haves” and the “have nots”

Contents

What is Poverty Line

Poverty line is the minimum level of income that is considered necessary to achieve an adequate standard of living. Poverty is a condition in which a person or community is deprived of or lacks the essentials for a minimum standard of well being and life.

The poor are not only short of income but also lack opportunities for growth. Their limited education makes it more difficult for them to avail opportunities for jobs. Added to this is poor health due to inadequate medical care which further handicaps their chances of realizing their potential. The social structure and institutions make matters worse by excluding them from participating in decision making on social and economic development.

Multi-dimensional Efforts

The basis for measuring poverty has primarily been money. Over the last few decades poverty alleviation efforts have become more multi-dimensional. The UN's Human Poverty Index considers factors such as illiteracy, malnutrition among children, early death, poor health care, and poor access to safe water, vulnerability to famine or flooding, lack of sanitation, exposure to disease, a diet poor in nutrients, and the absence of education as equally significant signs of poverty as material deprivation. Efforts need to be directed not only towards increasing the income level but also in providing the poor with basic social services and infrastructure.

How Poverty Line is Determined

Determining the poverty line is usually done by finding the total cost of all the essential resources that an average human adult consumes in one year. This approach is a needs-based assessment. This was the original basis of the poverty line in the United States, whose poverty threshold has since been raised due to inflation.

In developing countries, house rent is the most expensive of the resources and has a strong influence on poverty threshold. This is, therefore, a subject of special concern to economists. Individual factors such as whether one is a parent, elderly, a child, married, etc. are often used to handle various circumstances,

Measuring Poverty

Each country adopts poverty lines, which vary in time and place, in accordance with their development levels and norms and values of their society. A common method used by most countries to measure poverty is based on incomes or consumption levels. A person is considered poor if his or her consumption or income level falls below some minimum level necessary to meet basic needs.

The absolute poverty line set by the World Bank is the most commonly used definition of global poverty. The World Bank has set poverty limit at an income of $2 a day or less, and extreme poverty at $1 a day or less. This line was first created in 1990 when the World Bank published its World Development Report and found that $1 a day was the poverty line set by most developing countries. The $2 mark was created for developing nations with slightly better income levels than their $1 a day counterparts. For highly industrialized countries, such as Britain, Japan, and the U.S., the absolute poverty line is usually set higher (for example, the line has been set at $14.40 in the past). The 2005 poverty line for single individuals in the United States is set at $26.19 a day.

Objectives of Poverty Measures

Poverty measures are aimed at making poverty comparisons in order to work out an overall assessment of the progress a country is making in poverty alleviation and/or the evaluation of specific policies or projects. A good poverty profile can help reveal a number of aspects of poverty reduction policies, such as the regional or sectoral priorities for public spending. Poverty comparisons are also made over time, in assessing overall performance from the point of view of the poor.

Poverty Profile

  • Social definitions of poverty

Poverty is described as lack of essential items – such as food, clothing, water, and shelter – needed for proper living. At the UN World Summit on Social Development, the ‘Copenhagen Declaration’ described poverty as “…a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information.” When people are unable to eat, go to school, or have any access to health care, then they can be considered to be in poverty, regardless of their income.

  • Statistical definitions of poverty

Relative poverty measurement and absolute poverty measurement are two common numerically defined methods to measure and quantify poverty based on income or consumption values. These measures make it easy to gather information to compile statistics on poverty much easier.

  • Relative poverty

Relative poverty measures are the simplest ways to determine the extent of poverty in individual countries. Using this method, the entire population is ranked in order of income per capita. The bottom 10% (or whatever percentage the government concerned chooses to use) is then considered ‘poor’ or ‘impoverished.’ But this method is difficult to follow in a global setting as it would appear that both the U.S. and a sub-Saharan African country had the same 10% poverty rate, even though the conditions of the latter are much worse than those in the U.S.

  • Absolute poverty

Absolute poverty measures take into account a certain income amount or consumption amount per year, based on the estimated value of a ‘basket of goods’ (food, shelter, water, etc.) necessary for proper living. For example, if $5 a day is determined to be the income poverty line in a country, then anyone with an income of less than $1860 would be considered impoverished. If instead a poverty line based on consumption was used, anyone consuming goods with a monetary value of less than $1860 would be in poverty.


CopperBytes

  • Half the world — nearly three billion people — live on less than two dollars a day.
  • The GDP (Gross Domestic Product) of the poorest 48 nations (i.e. a quarter of the world’s countries) is less than the wealth of the world’s three richest people combined
  • Nearly a billion people entered the 21st century unable to read a book or sign their names
  • Less than one per cent of what the world spent every year on weapons was needed to put every child into school by the year 2000 and yet it didn't happen.
  • 51 percent of the world’s 100 wealthiest bodies are corporations
  • The wealthiest nation on earth has the widest gap between rich and poor of any industrialized nation.
  • The poorer the country, the more likely it is that debt repayments are being extracted directly from people who neither contracted the loans nor received any of the money
  • 20% of the population in the developed nations consumes 86% of the world’s goods
  • The 48 poorest countries account for less than 0.4 per cent of global exports
  • Approximately 790 million people in the developing world are still chronically undernourished, almost two-thirds of whom reside in Asia and the Pacific

References

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See Also