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The poverty threshold, or poverty line, is the minimum level of income deemed necessary to achieve an adequate standard of living. Income, refers to consumption opportunity gained by an entity within a specified time frame which is generally expressed in monetary terms The standard of living refers to the quality and quantity of goods and services available to people and the way these goods and services are distributed within a population In practice, like the definition of poverty, the official or common understanding of the poverty line is significantly higher in developed countries than in developing countries. Poverty (also called penury) is deprivation of common necessities that determine the quality of life including food clothing shelter and safe Drinking water, and The term developed country, or advanced country, is used to categorize countries with developed Economies in which the tertiary and quaternary sectors Developing countries are countries that haven't reached Western-style standards of democratic government free market economy industrialization social programs and human rights guaranties

Almost all societies have some citizens living in poverty. The poverty threshold is useful as an economic tool with which to measure such people and consider socioeconomic reforms such as welfare and unemployment insurance to reduce poverty. Welfare is financial assistance paid to people by governments Unemployment benefits are payments made by Governments to unemployed people

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 needs-based in that an assessment is made of the minimum expenditure needed to maintain a tolerable life. This was the original basis of the poverty line in the United States, whose poverty threshold has since been raised due to inflation. The most common measure of Poverty in the United States is the " poverty line " set by the U In economics inflation or price inflation is a rise in the general level of prices of goods and services over a period of time In developing countries, the most expensive of these resources is typically the rent required to live in an apartment. Economists thus pay particular attention to the real estate market and housing prices because of their strong influence on the poverty threshold. An economist is an expert in the Social science of Economics.

Individual factors are often used to account for various circumstances, such as whether one is a parent, elderly, a child, married, etc. The poverty threshold is adjusted each year. In 2006, in the United States of America, the poverty threshold for a single person under 65 was US$10,488; the threshold for a family group of four, including two children, was US$20,444. [1]

Contents

Defining poverty thresholds

Poverty thresholds can be defined in different ways:

Absolute poverty

Women washing clothes in a ditch alongside a main road in Mumbai, India.
Women washing clothes in a ditch alongside a main road in Mumbai, India. Mumbai ( Marathi:,, IPA: formerly Bombay, is the capital of the Indian state of Maharashtra and the financial India, officially the Republic of India (भारत गणराज्य inc-Latn Bhārat Gaṇarājya; see also other Indian languages) is a country

A measure of absolute poverty quantifies the number of people below a poverty threshold, and this poverty threshold is independent of time and place. For the measure to be absolute, the line must be the same in different countries, cultures, and technological levels. Such an absolute measure should look only at the individual's power to consume and it should be independent of any changes in income distribution. Such a measure is only possible when all consumed goods and services are counted and when PPP-exchange rates are used (see purchasing power parity). The purchasing power parity ( PPP) theory uses the long-term equilibrium Exchange rate of two currencies to equalize their Purchasing power. The intuition behind an absolute measure is that mere survival takes essentially the same amount of resources across the world and that everybody should be subject to the same standards if meaningful comparisons of policies and progress are to be made. Notice that if everyone's real income in an economy increases, and the income distribution does not change, absolute poverty will decline. Income inequality metrics or income distribution metrics are techniques used by economists to measure the distribution of Income and Economic inequality

Measuring poverty by an absolute threshold has the advantage of applying the same standard across different locations and time periods, making comparisons easier. On the other hand, it suffers from the disadvantage that any absolute poverty threshold is to some extent arbitrary; the amount of wealth required for survival is not the same in all places and time periods. For example, a person living in far northern Scandinavia requires a source of heat during colder months, while a person living on a tropical island does not.

This type of measure is often contrasted with measures of relative poverty (see below), which classify individuals or families as "poor" not by comparing them to a fixed cutoff point, but by comparing them to others in the population under study.

The term absolute poverty is also sometimes used as a synonym for extreme poverty. Extreme poverty is the most severe state of Poverty. Many cannot meet basic needs for Food, Water, Shelter, Sanitation, and Health

According to a UN declaration that resulted from the World Summit on Social Development in Copenhagen in 1995, 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 services. "[2]

David Gordon's paper, "Indicators of Poverty & Hunger", for the United Nations, further explains that absolute poverty is the absence of any two of the following eight basic needs:[2]

For example, a person who lives in a home with a mud floor is considered severely deprived of shelter. A person who never attended school and cannot read is considered severely deprived of education. A person who has no newspaper, radio, television, or telephone is considered severely deprived of information. All people who meet any two of these conditions — for example, they live in homes with mud floors and cannot read — are considered to be living in absolute poverty.

Relative poverty

See also: Relative deprivation

A measure of relative poverty defines "poverty" as being below some relative poverty threshold. Relative deprivation is the experience of being deprived of something to which one thinks one is entitled An example is when poverty is defined as households with an accumulated income less than 50% of the median income is a measure of relative poverty. Notice that if everyone's real income in an economy increases, but the income distribution stays the same, relative poverty will also stay the same. Income inequality metrics or income distribution metrics are techniques used by economists to measure the distribution of Income and Economic inequality

Relative poverty measurements can produce odd results in small or unusual populations. For example, if the median household in a wealthy neighborhood earns US$1 million each year, then a family that earns US$100,000 would be considered poor on the relative poverty scale. In Probability theory and Statistics, a median is described as the number separating the higher half of a sample a population or a Probability distribution At the other end of the scale, if the median household in a very poor neighborhood earned only 50% of what it needs to buy food, then a person who earned that amount would not be considered poor on a relative poverty scale, even though the person is clearly poor on an absolute poverty scale.

Measures of relative poverty are almost the same as measuring inequality: If a society gets a more equal income distribution, relative poverty will fall. Following this, some argue that the term 'Relative Poverty' is itself misleading and that 'Inequality' should be used instead. They point out that if society changed in a way that hurt high earners more than low ones, then 'relative poverty' would decrease, but every citizen of the society would be worse off. Likewise in the reverse direction: it is possible to reduce absolute poverty while increasing relative poverty.

The phrase relative poverty can also be used in a different sense to mean "moderate poverty" – for example, a standard of living or level of income that is high enough to satisfy basic needs (like water, food, clothing, shelter, and basic health care), but still significantly lower than that of the majority of the population under consideration. Water is a common Chemical substance that is essential for the survival of all known forms of Life. Food is any substance usually composed primarily of Carbohydrates Fats water and/or Proteins that can be eaten or drunk by an Clothing (also called clothes, accoutrements, accouterments, or habiliments) protects the Human body from extreme Weather Health care is the prevention treatment and management of illness and the preservation of mental health through the services offered by the medical, Nursing

Basic needs

Some measurements combine certain aspects of absolute and relative measures. For example, the Fraser Institute publishes a basic needs poverty measure for Canada. The Fraser Institute is Conservative and Libertarian Think tank based in Canada that espouses Free market principles The basic needs approach is one of the major approaches to the measurement of Absolute poverty. Country to "Dominion of Canada" or "Canadian Federation" or anything else please read the Talk Page According to the Fraser Institute, "the basic-needs approach is partly absolute (the list [of necessities] is limited to items required for long-term physical well-being) and partly relative, reflecting the standards that apply in the individual's own society at the present time. "[3] The Fraser Institute's list of necessities for living creditably in Canada includes not only food, shelter, clothing, and health care, but also personal care, furniture, transportation, communication, laundry, and home insurance. Food is any substance usually composed primarily of Carbohydrates Fats water and/or Proteins that can be eaten or drunk by an Clothing (also called clothes, accoutrements, accouterments, or habiliments) protects the Human body from extreme Weather Health care is the prevention treatment and management of illness and the preservation of mental health through the services offered by the medical, Nursing Hygiene refers to practices associated with ensuring good health and cleanliness Furniture is the Mass noun for the movable objects which may support the human body (seating furniture and beds, provide storage or hold objects on horizontal Transport or transportation is the movement of people and goods from one place to another Communication is the process of conveying information from a sender to a receiver with the use of a medium in which the communicated information is understood the same way Laundry can be items of Clothing and other Textiles that require Washing the act of washing clothing and textiles Home insurance, also commonly called hazard insurance or homeowners insurance (often abbreviated in the real estate industry as HOI) is the type of It is criticized for not including any entertainment items like cable television, daily newspapers, and tickets to movies or sporting events. [4][3]

Criticisms

Using a poverty threshold is problematic because having an income marginally above it is not substantially different from having an income marginally below it: the negative effects of poverty tend to be continuous rather than discrete, and the same low income affects different people in different ways. To overcome this problem, poverty indices are sometimes used instead; see income inequality metrics. Income inequality metrics or income distribution metrics are techniques used by economists to measure the distribution of Income and Economic inequality

A poverty threshold relies on a quantitative, or purely numbers-based measure of income. A quantitative attribute is one that exists in a range of magnitudes and can therefore be measured. If other human development-indicators like health and education are used, they must be quantified, which is not a simple (if even achievable) task.

Public and private charitable gifts are not counted when calculating a poverty threshold. For example, if a parent pays the rent on an apartment for an adult daughter, that money does not count as income to the daughter. If a church or non-profit organization gives food to an elderly person, that also does not count as income. Rea Hederman, a senior policy analyst in the Center for Data Analysis at the Heritage Foundation, in the United States, complained,

The official poverty measure counts only monetary income. The Heritage Foundation is an American conservative Think tank. The United States of America —commonly referred to as the It considers antipoverty programs such as food stamps, housing assistance, the Earned Income Tax Credit, Medicaid and school lunches, among others, "in-kind benefits" -- and hence not income. The US Food Stamp Program is a Federal assistance program that provides food to low and no income people living in the United States. The United States federal Earned Income Tax Credit (EITC or EIC is a Refundable tax credit. Medicaid is the United States health program for eligible individuals and families with low incomes and resources A school dinner is a Meal (usually Dinner or Lunch) provided to Students at a School. So, despite everything these programs do to relieve poverty, they aren't counted as income when Washington measures the poverty rate. [5]

See also

References

  1. ^ Prior HHS Poverty Guidelines and Federal Register References. Although the most severe Poverty is in the Developing world, there is evidence of poverty in every region These are lists of Countries of the world by percentage of population living in Poverty. Poverty in China refers to people whose income is less than a Poverty line of $1 per day ( PPP) set by the World Bank benchmark (see One-third of India's population (roughly equivalent to the entire population of the United States lives below the poverty line and India is home to one-third of the world's poor people The most common measure of Poverty in the United States is the " poverty line " set by the U Retrieved on 2008-02-28. 2008 ( MMVIII) is the current year in accordance with the Gregorian calendar, a Leap year that started on Tuesday of the Common Events 202 BC - coronation ceremony of Liu Bang as Emperor Gaozu of Han takes place initiating four centuries of the Han Dynasty 's rule
  2. ^ a b Indicators of Poverty and Hunger. Retrieved on 2008-02-14. 2008 ( MMVIII) is the current year in accordance with the Gregorian calendar, a Leap year that started on Tuesday of the Common Events 842 - Charles the Bald and Louis the German swear the Oaths of Strasbourg in the French and German
  3. ^ a b Poverty in Canada: 2006 Update, Fraser Institute, November 2006, URL accessed 14 February 2008
  4. ^ "Defining and Re-Defining Poverty: A CCSD Perspective", October 2001, Canadian Council On Social Development
  5. ^ "Poor poverty yardsticks", Rea S. The Fraser Institute is Conservative and Libertarian Think tank based in Canada that espouses Free market principles Hederman, Jr. , September 8, 2006, The Heritage Foundation

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