Relative Poverty - 2021 Revision Update

In this updated revision video, we look at the important concept of relative poverty.

Our focus will be on income but please keep in mind that relative poverty is multi-dimensional, and that income is a narrow albeit important focus

What is relative poverty?

Relative poverty is household income considerably lower than the median income within a country. The relative poverty line is usually household disposable income of less than 60% of median income.

Median per capita income reveals the progress of a ‘typical’ person in society and is not influenced to what happens at the tails of the distribution for the lowest and highest income families.

How can we measure relative poverty?

A common relative poverty measure is the percentage of population living below 60% of median disposable household income

Relative poverty might also include relative differences in consumption and access to essential services and products (though this involves making a value judgement)

Relative poverty also measured by conventional indicators of income and wealth inequality such as the Gini Coefficient and the Palma Ratio

Gini coefficient: The Gini coefficient measures how equally income is distributed in a society, where 0 = perfectly equal, 1 = when all income goes to 1 person

Palma Ratio: Ratio of the income of richest ten percent of households to the income of the poorest forty percent of people