This chapter discusses the merits and shortcomings of absolute and relative definitions of poverty. Depending on the definition, socio-political models for poverty alleviation can be residual and target the neediest, aiming at securing people’s basic needs, or they can be redistributive and focus on enhancing living standards and welfare. Drawing on the “command over resources” approach, resources are seen as the most central element of welfare. Through discussion of various definitions, critical debates and understandings of poverty, the aim is to show that in order to understand poverty one needs definitions that account for absolute and relative perspectives in combination. Absolute definitions help shed light on the unacceptable situation of the global poor and recognise that some forms of poverty are worse than others. Relative definitions show that even within a wealthy nation with high living standards some people experience intolerable material and economic hardships. The resources needed to escape poverty are always relative to the society where people live, at a specific time, and conditional to individuals’ characteristics and opportunities. Nevertheless, socio-political solutions to poverty should acknowledge the importance of raising the incomes of the poor. Hence, the significance of money should not be downplayed.
Various definitions of poverty lead to different perceptions of who is poor and who is not, and imply different understandings of human needs, welfare and wellbeing. Depending on our definition, socio-political solutions to poverty can be either residual (i.e. based on the residual model) and target the neediest, aiming to secure their basic needs, or redistributive and focus on enhancing living standards and welfare. An important question is whether only the most deprived people in the world should be defined as poor. Alternatively, do we simultaneously need to recognise that even in a wealthy nation with high living standards and a comprehensive welfare state some people experience intolerable material and economic hardships?
The aim of this chapter is to discuss the merits and shortcomings of absolute and relative definitions of poverty, and their implications for socio-political interventions. First, we will discuss wider frameworks of welfare and wellbeing for a more in-depth understanding of poverty. Second, we will elaborate on absolute and relative approaches and their assumptions and opposing arguments. We will end the chapter by summarising the implications of the various understandings of poverty.
One major debate in defining poverty is whether we should concentrate on physical survival only, or include a broader understanding of people’s wellbeing and welfare. Behind varying perspectives lie competing visions of human agency, needs and welfare. These perspectives should be recognised and discussed, also with regard to their contribution to policies that address poverty.
In Scandinavia, the level of living research has a strong tradition and has been influenced by British socio-political research. Drawing on Richard Titmuss (1907–1973), resources in terms of money, possessions, knowledge, social relations and security are highlighted as central elements of welfare. Understanding level of living as “command over resources” implies that individuals are active human beings, a perspective that has roots in classical sociological theory (e.g. Marx, Weber) (Johansson 1970, 25; Erikson and Uusitalo 1987, 184–186).
Resources can be individual, collective or acquired (Official Norwegian Reports (NOU) 2009:10, 10). In the possession of resources, individuals can actively control and direct their living conditions, as opposed to being viewed as passive human beings who are provided for. Having command over resources also increases individuals’ life chances and opportunities to maximise welfare. The value of the resources an individual has command over depends, however, on the circumstances in which she lives and whether there is a possibility to use the resources.
In contrast to the resource perspective, the basic needs perspective gives prominence to day-to-day survival (Esping-Andersen 2000, 6; Erikson and Uusitalo 1987, 189). Within the Scandinavian welfare approach, welfare problems are seen as interrelated. In other words, they do not affect individuals and families as isolated problems, but tend to correlate and accumulate over time (Esping-Andersen 2000, 5; Fritzell and Lundberg 2007, 6).
Social policies involve normative standards and value judgements, and should therefore be subject to dispute and discussion. Nevertheless, the more general a welfare problem is, the more difficult it is to arrive at a single, unambiguous answer (Weber 1949, 56). Johansson (1970, 29) argues that, while it is difficult to agree on what characterises a good life, it is easier to agree on the opposite, i.e. what characterises poor life conditions. The aim of the level of living approach, as described by Johansson (1970, 30), is to give priority to problems or conditions that can be addressed through political decisions and relieved by means of institutional arrangements such as national health services, educational institutions or labour market institutions.
The resources approach is closely related to Amartya Sen’s concept of capabilities (Esping-Andersen 2000, 5) as part of a more subjective wellbeing approach to welfare. Sen distinguishes between functionings and capabilities. Functionings are the many things a person may value to be or to do. Examples of such functionings are being able to work and being in good health. Capabilities are a person’s actual freedom to choose from combinations of functionings, irrespective of whether that person chooses to exercise this freedom or not (Sen 1999, 75). Emphasis is placed on the level of freedom that people can achieve and resources are instrumental to increased wellbeing (Robeyns 2005, 95). People are seen as active and able to make changes. Moreover, individual achievements are assessed in terms of people’s own values, objectives and choices (Sen 1999, 19).
According to Sen, poverty should be seen as deprivation of basic capabilities, rather than low income (Sen 1999, 87). There are aspects of human needs that are universal, meaning capabilities that apply at all times and in all places. For instance, the capability of avoiding shame (Sen 1983, 161). However, the resources we need to meet a capability, say, to buy adequate clothing for our children, require varying commodities, which are relative to the society we live in. In such cases an “absolute approach in the space of capabilities translates into a relative approach in the space of commodities” (Sen 1983, 167–168).
The capability and wellbeing approaches are oriented more toward individual agency and less toward the influence of institutions and processes (Daly 2011, 45). Theoretically, the command over resources approach stresses the importance of individual agency and the commitment of the welfare state to enabling citizens to uphold agency.
Picture an unemployed single mother living in an urban slum in Southern Asia. The mother and her children are deprived of basic human needs in terms of money to buy nutritious food, and access to safe shelter, clean water and proper sanitation. There are no available collective benefits. The mother, lacking command over minimum resources to provide for the livelihood and security of her children, is forced to live from hand to mouth to survive. The choices and opportunities open to her and her children are severely restricted by lack of resources. This fictitious, but realistic example suggests that absolute definitions of poverty shed light on the severity of deprivation of those who are worst off globally.
Absolute poverty is often associated with objective and definable basic needs, irrespective of time and place. Examples of basic needs are food, clothing, shelter, which are all essential to the physical survival of humans (Roll 1992, 14). An absolute standard measuring poverty can also serve as a fixed benchmark that is used to measure progress, or lack of progress, over time (Townsend 2010).
Absolute approaches based on basic needs tend to treat individuals as passive human beings. Seen from the perspective of the poor there is, however, and this applies to all of us, a fundamental desire to have freedom of choice and action, to be able to make choices, to do basic things without constraints, and to have some form of control over what happens in the future (Narayan et al. 2000, 29).
Poverty definitions based on basic needs have been criticized, as judgements of what constitutes minimum necessities cannot be objective. Instead, they represent normative standards and value judgements usually established through expert opinions (Langan 1998, 1; Roll 1992, 15).
Needs comprise both elements that arise from nature, such as physical survival, and elements that are socially determined (Langan 1998, 4). The World Bank report, Crying Out for Change: Voices of the Poor (Narayan et al. 2000, 29), shows variation in needs by individual characteristics, such as livelihood, age and gender, and across contexts including region and rural and urban areas. Townsend argues that we cannot separate people’s “physical efficiency” from their wellbeing and without reference to the way their society is organised and structured and the available societal resources. Hence, poverty is a dynamic concept as needs change over time and across different contexts (Townsend 2010, 93–94).
When living patterns and activities change, the definitions of basic needs also change (Ruggles 1990). In the United States, the official poverty measure, developed in the 1960s, is based on an absolute standard, at a fixed level of income (adjusted to family size, number of children, and inflation rate) (Royce 2015, 10). The measure has not been revised to take account of new patterns of consumption. As a result, the poor in the first decades of the 21st century can afford fewer basic needs for an ordinary way of life compared with the poor in the decade the poverty measure was developed. Shaefer and Edin (2013, 259, 266) showed that, between 1996 and 2011, the number of US households that lived on US$2 or less per person per day had increased from 636,000 to 1.65 million. 1 Explanations for this change were the welfare reform leading to reductions in the cash safety net for non-workers, and the slow economic growth and job losses of the 2000s.
Ruggles (1990, 20) points out that when the poverty line is far below the norms of consumption within a society, the absolute poor are more likely to suffer severe and multiple disadvantages. Policy makers may interpret increases in multiple disadvantages among the poor as a sign that policies aimed to reduce poverty are, in fact, creating a more socially disadvantaged poor population over time. Ultimately, such interpretations may prompt politicians to advocate less generous social policies. Looking back historically, this latter point is illustrated by Charles Murray (1984). In the context of the US, he argues that benefits did not alleviate poverty; rather, they created it through changing incentives and, consequently, changing behaviour of the poor (King and Ross 2010, 50). In Losing Ground: American Social Policy 1950–1980, Murray (1984, 154) holds that it was the changes in financial incentives that explained increasing unemployment among the young. Within a rational decision-making framework, the argument is that when poor people got more money from welfare than from low-paying jobs, “maximizing short-term gains” led to lower labour force participation. According to Murray (1984, 204), welfare transfers should be treated in the same way as a doctor applies a dangerous drug: “not at all if possible and no more than necessary”.
A long-term social assistance recipient with a history of mental ill health and sparse work experience, who is living in a rich and generous welfare state, is likely to have access to minimum resources. He probably has a roof over his head with help from housing support and he can buy food and other necessities with his monthly social assistance payments. If we compare his situation with the severe situation of the poor mother in the urban slum in Southern Asia, we do not think of him as poor. However, multiple interacting disadvantages, sparse and depleted resources, and difficulties to convert resources into a good life will reduce his ability to control and direct his living conditions and take part in ordinary life. Relative to most people in affluent societies, we would still view the situation of the long-term social assistance recipient as one of living in poverty. Hence, relative definitions remind us that even within a wealthy nation with high living standards and access to collective welfare resources, some people experience degrees of material and economic hardship that most of us would deem intolerable (Roll 1992, 18).
According to Gordon (2007, 32), poverty can be defined as an “insufficient command of resources over time”, which leads to deprivation. The idea of the relative poverty approach is that we should not “discount the flesh and blood, and the problems, of ordinary life” (Townsend 2010, 94). Hence, relative approaches to poverty emphasise that needs are socially determined. That is, the resources needed to acquire food, clothes and consumption goods, and to take part in social activities vary based on where in the world and at what time we live. In Norway, the Red Cross offers summer holiday trips to children from economically deprived families. 2 The example illustrates that going on a summer holiday, at least occasionally, is a part of ordinary living patterns and activities in a wealthy country such as Norway.
Critics argue that relative poverty is more an assessment of inequality, than of poverty (Sen 1983). Relative definitions take the “moral imperative that something should be done” out of the definition when the situation of the relative poor is compared to a situation of extreme deprivation were almost everyone lacks basic necessities (Roll 1992, 17; Piachaud 1987, 161). In the example mentioned above, the Red Cross offers economically deprived children in Norway summer holiday trips. By contrast, the single mother in the urban slum of Southern Asia cannot provide her children with safe housing, clean water or sanitation. Relative definitions are further based on constantly changing criteria, as they relate to contemporary standards of what is a decent life (Sen 1983, 156).
An example from the global financial crisis of 2008, the “Great Recession”, illustrates this latter point. Duiella and Turrini (2014, 10) report that increases in poverty during the crisis were mainly increases in material deprivation, not relative income poverty. The result is surprising in light of high unemployment rates, combined with austerity measures as the default policy response within many European Union (EU) countries (Blyth 2013; Martin 2015; OECD 2014, 2015). However, the measures of relative income poverty are difficult to interpret in times of economic change, because the poverty line changes. Those at the bottom may suffer income loss; however, when the income of all households falls, the relative poverty will decline if the income of those in the middle falls by more than that of those at the bottom (OECD 2014, 112). Therefore, a more absolute measure of relative income poverty is sometimes used, referred to as “anchored” poverty, in which a certain year is used as a benchmark for the poverty line (OECD 2014, 23). Results from the OECD (2014, 112) showed that, when assessed by this method, relative poverty rates increased by as much as two percentage points in several of the countries during the first years of the crisis.
However, Sen (1983, 159) argues that there is an “irreducible absolutist core in the idea of poverty”, which implies that a relative approach to poverty cannot entirely capture the severity of the situation in which the most deprived people in the world live. In 2016, about 815 million people in different parts of the world were undernourished, and the UN reports that hunger and malnutrition are rising globally (United Nations 2018, 3–4). The humanitarian crisis in Yemen is currently the worst in the world, where three-quarters of the population are in need of aid and protection. 3 People who do not know how to get their next meal and whose children die because of malnourishment are poor by any standard.
Estimates from the UN indicate that in 2013, 783 million people lived below the World Bank’s international poverty line (IPL), which is below US$1.90 per person per day (United Nations 2018, 3). The IPL is intended to capture poverty based on the standards of the poorest countries (Ravallion, Chen and Sangraula 2009, 164). Although the measure serves to reflect low economic resources, the US$1.90-a-day 4 poverty line does not necessarily reflect a standard adequate to meet basic human needs (Allen 2013, 6).
In 1995 after the World Summit, the UN defined absolute poverty as a condition “characterized by severe deprivation of basic human needs” distinguished from “overall poverty”. The merits of this definition of absolute poverty are that it sheds light on the more “absolute” aspects of relative deprivation without treating poverty as a fixed standard and taking into account the situation of the globally worst off (United Nations 1995, 57; Gordon 2007, 35).
When poverty is seen as inability to participate in society, it involves both a low income and a low standard of living (Gordon 2007, 39; Townsend 1979). According to Ringen (1988, 355), definitions of financial poverty emphasise the equality of opportunities, while definitions of material deprivation emphasise the equality of results. Material deprivation includes achieved living standards, as opposed to the money people have at their disposal. Hence, the measure of material deprivation aims to capture key aspects of customary living conditions across the EU, aspects that people do not possess when they lack resources (Guio et al. 2016, 221).
A given income level can mean different standards of living across contexts due, for instance, to varying price levels, living requirements and availability of welfare services (Blackwood and Lynch 1994, 568). The availability of benefits in cash and in kind may influence people’s income and consumption differently (Nelson 2012, 150–151). Kenworthy, Epstein and Duerr (2011, 37) suggest that social policies are related to reduced material deprivation since they provide services to meet individuals’ needs. Services may indirectly enhance the earning capacity of a household through, for instance, active labour market policies and caring services for the elderly or for children (Nelson 2012, 151), while cash upholds purchasing power, enabling individuals and households to buy material necessities.
Sen is critical of perspectives that take account of the opportunities people have through the economic means they possess, but neglect the different opportunities they have to convert means into good living or capabilities (Sen 2009, 65–66). A person with a chronic disease will, for instance, need more resources to achieve the same living standard, compared with a healthy person. The above example of the long-term social assistance recipient with ill mental health serves to illustrate the notion of “coupling” of disadvantages (Sen 1999, 88). Mental health problems may first restrict the opportunities to earn an adequate living by working. Second, they restrict the ability to convert low earnings into material necessities due to the extra expenses related to medicines and medical treatments.
Another criticism of the concept of material deprivation is that lack of material necessities is not always equal to poverty; instead, it may reflect taste, preferences and diversity in living styles (Piachaud 1981, 420). The material deprivation indicator adopted by the EU assesses whether lack of consumption goods is related to an “enforced lack”, meaning that people would like to possess them, but cannot afford them (Fusco, Guio and Marlier 2013, 45). Hick (2012, 296) argues that lack of material items due to other impediments, such as disability and discrimination, is still unaccounted for. A key challenge in measuring material deprivation in the EU is to find suitable, valid and reliable indicators across countries with heterogeneous living standards, that can be aggregated into a material deprivation indicator (cf. discussion by Fusco, Guio and Marlier 2013, 44–46; Guio et al. 2016, 221–222).
The measures of at-risk-of-income-poverty and material deprivation, adopted by Eurostat, use a national and cross-national framing for social comparisons (Fahey 2010, 16). Therefore, the rate of material deprivation across countries varies much more than does the rate of income poverty. In this sense, material deprivation has an absolute characteristic assessing differences in living standards across countries while the at-risk-of-income-poverty measure assesses relative deprivation within countries (Nolan et al. 2010, 310–311). Analyses show that there is only moderate overlap between income poverty and material deprivation, meaning that people who are income poor are not always materially deprived, and vice versa (Nolan et al. 2010).
The aim of this chapter was to discuss the merits and shortcomings of absolute and relative definitions of poverty, and their implications for socio-political interventions. We view poverty as an aspect of welfare and draw on the command over resources approach where resources are seen as the most central element of welfare. Depending on the resources an individual has, she can actively control and direct her living conditions, rather than being viewed as a passive human being who needs to be provided for. We also draw on Sen’s subjective wellbeing approach in which the concept of capabilities is a central element. Both approaches emphasise the freedom people can achieve through resources.
Through discussions of various definitions, critical debates and understandings of poverty, we have shown that, in order to understand poverty, we need definitions that account for absolute and relative perspectives in combination. Absolute definitions help shed light on the unacceptable situation of the global poor, and show that some forms of poverty are worse than others. If we adopt narrow definitions based on basic needs, we nonetheless risk losing sight of people’s need to have a variety of resources in order to be able to make choices and to take control and direct their lives.
An absolute approach to relative deprivation therefore helps shed light on the severe situation of those who are worst off, without treating poverty as a fixed state. Relative approaches to poverty ultimately consider people’s broader welfare and wellbeing, relative to the society in which they live, and view poverty as a dynamic concept (Townsend 2010, 93–94). Hence, relative definitions remind us that, even within a wealthy nation with high living standards and access to comprehensive welfare resources, some people experience degrees of material and economic hardship that most of us would deem intolerable (Roll 1992, 18). Absolute perspectives imply that some needs may be universal. However, the resources needed to satisfy needs are conditional to time and place as well as to the individual’s characteristics and opportunities.
Poverty seen as the inability to participate in society involves both low income and low standards of living (Townsend 1979). Economic and material definitions of poverty emphasise opportunities and achievements differently. Measures of material deprivation shed light on achieved living standards, as opposed to the financial means at people’s disposal.
There are numerous unresolved issues involved in how to measure relative poverty and most of the measurements have drawbacks. When they help shed light on one aspect, for instance the number of income poor, they leave out other aspects, such as the extent of economic impoverishment or the distribution of income among the poor (Blackwood and Lynch 1994, 569).
Whether poverty is defined narrowly in absolute terms or more broadly in relative terms may result in different socio-political solutions (Lister 2004, 35). Sen (2009) contends that lack of financial resources is not the sole cause of poverty. This is due to, among other things, individual characteristics and conversion problems. We agree, in line with Lister (2004, 19), that if we downplay the importance of money we risk policies that do not sufficiently acknowledge the need to raise the incomes of people who experience poverty. Services alone, and opportunities for children from economically deprived families to occasionally go on a summer holiday, will not suffice to lift economically deprived people and families out of poverty. In the context of post-industrial societies new needs arise and so do new policies to address these needs (Taylor-Gooby 1997, 171). Similar welfare challenges are, however, addressed differently in different welfare contexts (Esping-Andersen 2002, 5; Lister 2003). One important challenge is, as we see it, not to replace “passive” income maintenance policies with “active” (human capital investment) policies. Rather, the two policy approaches should be combined to prevent people from falling into poverty, and assist people (back) into working life.
There is, however, no guarantee that more comprehensive social policies introduced in countries with a limited welfare state would succeed in reducing poverty. There are other important factors to account for, such as the absence of institutions and social partners (e.g. unions) (Barth and Moene 2008), armed conflicts, natural disasters, and corruption within society. In order to be able to eradicate poverty we need to understand the complex societal dynamics involved (Sieger 2011, 887). In the literature, there are competing claims for who should bear the responsibility to ameliorate global poverty: is it the state or those who have power and resources to act (Sieger 2011, 887)? Although this is an important question, it is beyond the scope of this chapter.
The authors adopted one of the World Bank’s key indicators of global poverty (Shaefer and Edin 2013, 254).
www.rodekors.no/tilbudene/ferie-for-alle/ (accessed 2 November 2018).
https://unocha.exposure.co/eleven-facts-about-the-yemen-crisis (accessed 27 October 2018).
The IPL was adjusted from $1.25 to $1.90 in 2015, www.worldbank.org/en/topic/poverty/brief/global-poverty-line-faq (accessed 16 October 2018).