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Poverty can be defined in an absolute or relative way. Absolute poverty is characterised by an insufficient intake of food, clothing and shelter to enable individuals to continue to live at a minimum standard. By contrast, relative poverty is defined by identifying the poorest group in a particular community. Thus, in a developed economy, poverty could be defined as being in the bottom 10 per cent of income earners. When poverty is defined in this way it can be the case that a rich nation’s poor have a much higher standard of living than the average standard of living of the residents of a poor nation. Clearly absolute poverty can be eliminated by raising the income of people currently below the minimum standard so that they have sufficient food, clothing and shelter to meet this standard. By contrast, relative poverty can only be improved by making the distribution of income more equitable such that the poorest group in society has a standard of living sufficiently close to that of the remainder of the population that to describe them as being in poverty does not make sense. While the formula for eliminating relative poverty in rich nations is relatively obvious, the world continues to struggle with solutions to the problem of absolute poverty in those nations where the vast majority of the population have experienced chronic poverty over many decades.
Professor & Head of QUT's School of Economics and Finance, Tim Robinson
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