By and large, relative poverty refers to a situation whereby a group of persons lacks the minimum income that is required to sustain life in a society in which they belong (Brady and Bostic, 2015). For this reason, relative poverty is considered the most suitable measure of poverty in respective countries considering such factors as the country’s per capita income and income disparity. In spite of this measure of poverty being more subjective than the absolute measure of poverty, there are also several cons of employing it as a measure of poverty. In this paper, an illustration of both the advantages and disadvantages of relative poverty is going to be done. Further, an evaluation of the pros and cons along with case studies for both the United States and the United Kingdom will be demonstrated.
The first advantage of a relative measure of poverty is that it highlights the conditions of a society at a given time. In essence, relative poverty is such that it assesses the income inequality in a country which is normally a better measure of poverty compared to absolute poverty (Wolff, 2015). For instance, first world countries usually have a high average household income compared to developing countries. Similarly, the cost of living in the developed countries is quite high compared to developing nations. When using an absolute measure of poverty, an individual in a developing country could be categorized as poorer than their counterpart in a developed country. However, the average income of the individual in a developing country could be sufficient for survival in his or her respective country while that of the individual in a developed country could be insufficient due to different levels of cost of living. Therefore, relative poverty is plausible since it considers such conditions as the cost of living in the respective countries or societies.
The other advantage of a relative measure of poverty is that it broadens the concept of what poverty entails. Essentially, using a relative measure of poverty also brings into consideration non-physical necessities such as leisure which is commonly ignored in absolute poverty measure. In wealthy countries, for instance, the average household income is usually such that the majority of individuals can afford necessities. However, those whose income falls below 60% of the median income will still be categorized as below the poverty line (Ravallion and Chen, 1997). The people can afford all the basic needs required for survival, but the relative income disparity makes them unable to afford some forms of luxuries afforded by some members of their societies. Hence, the concept of poverty is broadened beyond the affordability of basic needs.
The other advantage of relative poverty is that it is the most appropriate measure in rich countries. In most rich countries, absolute poverty is usually small and negligible. Most people can afford basic needs such as food, shelter, and clothing. In spite of this, there still exist inequality between the proletariats and the aristocrats. In order to correctly examine the inequality that exists in such societies, the relative poverty line will be more plausible.
In spite of the advantages mentioned above of a relative measure of poverty, there are also some disadvantages and burdens of employing this measure to assess poverty levels in a country. First, relative poverty is such that it is difficult to make international comparisons. The measure is based on welfare conditions at the given time. Such conditions are not usually static. For instance, the welfare conditions in the United States are quite different from those in the United Kingdom. Thus, the relative poverty line of the United States will mean something entirely different that of the United Kingdom. A textbook case is the relative poverty line of both the United States and Indonesia in the 1990s. The level of relative poverty in both countries stood at 15% (Sumner, 2012). However, there are a lot of individuals that were categorized as living below the relative poverty line in the United States that would have been categorized as well-off based on the Indonesian standards. Thus, this poverty measure cannot be used to make comparisons between countries.
The other con of employing the relative measure of poverty is that it is inelastic to the overall well-being in a society. The measure relies on how consumption in a society is distributed in order to assess the aggregate levels (Klasen et al., 2016). However, in some situations, the consumption level would be a more suitable way of assessing the poverty levels. For instance, when the average consumption for every person doubles in a society, the relative poverty will remain the same. However, the overall well-being will have improved for everyone since the poverty levels will have dropped for everyone. Thus, the insensitiveness of relative poverty to overall well-being makes its unsuitable in certain scenarios.
The other disadvantages that arise from relative poverty’s overreliance on consumption distribution rather than overall consumption are that when the poor get poorer when all other factors are held constant, the average household income drops. In turn, the poverty line also drops which eventually leads to the decline of the relative poverty measure. On the other hand, when the rich get richer while all other factors are held constant, the relative poverty line rises as a result of increased average household income. The relative poverty measure, therefore, increases.
A classic example of the difficulty in making comparisons between countries using the relative poverty measure can be illustrated by the 2006/2007 data of both the United States and the United Kingdom. According to the U.S government, 18% of children were living below the relative poverty line (Shwalb and Wiseman, 2008). On the other hand, the U.K government recorded that 22% of the children lived below the poverty line (Shwalb and Wiseman, 2008). It seems as though children in the United States were better off. However, this is misleading since the procedures used in measuring poverty between the two countries were different. When the same procedure used in the UK is used in the US, the relative poverty level in the U.S would have been 29%.
Overall, the relative measure of poverty has both benefits and burdens. For instance, it cannot be used to compare countries. It is however essential when assessing inequality in rich countries. Thus, one should be guided by the objectives of assessing the poverty levels on whether to use this measure or not.
Bibliography
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Klasen, S., Krivobokova, T., Greb, F., Lahoti, R., Pasaribu, S.H., Wiesenfarth, M., 2016. International income poverty measurement: which way now? The Journal of Economic Inequality 14, 199–225.
Ravallion, M., Chen, S., 1997. What can new survey data tell us about recent changes in distribution and poverty? The World Bank Economic Review 11, 357–382.
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Sumner, A., 2012. The Evolving Composition of Poverty in Middle-Income Countries: The Case of Indonesia, 1991–2007. IDS Working Papers 2012, 1–67.
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