Absolute poverty – not having sufficient income to cover basic needs such as food, water, clothing, shelter etc.
Relative poverty – not having sufficient income to fully participate within society.
MEASURES OF POVERTY – INTERNATIONAL
The Human Poverty Index (HPI) measures poverty through three composite factors: longevity (probability of surviving to a certain age), knowledge and a decent standard of living. There are two different types, HPI-1 (for developing countries) and HPI-2 (for developed countries. Each one defines the terms slightly differently to account for the differences between countries.
The World Bank uses a measure that considers living on less that $1.90 a day is considered extreme deprivation. Currently 17% of world population is below this line (1.2 billion people). Significant deprivation is classed as living below $2.50 a day, which 40% of people live on.
MEASURES OF POVERTY – NATIONAL
In the UK, poverty used to be measured through household income. Poverty was defined as having a household income that is below 60% of the median household income after housing costs are paid. The UK has proportionally more children in poverty than any other developed country and there are more people in relative poverty than in any other EU country.
MEASURES OF INEQUALITY
Lorenz curve – a graphical indicator of income inequality
Gini coefficient – gives a numerical value for inequality (ranges from 0 to 1)
It shows the distribution of income within a country. The straight line is indicative of perfect equality (distribution of income). The further away the curve is from the line of perfect equality, the more unequal the distribution of income in that country. The graph itself shows % of households plotted against % of income.
The Gini coefficient is derived from the Lorenz curve. A value of 0 means complete equality of income distribution whilst a value of 1 means complete inequality of income distribution (one person/household holds all income).