Poverty Dictionary Definition

1. The state of being poor; lack of the means of providing material needs or comforts.
2. Deficiency in amount; scantiness: the poverty of feeling that reduced her soul (Scott Turow).
3. Unproductiveness; infertility: the poverty of the soil.
4. Renunciation made by a member of a religious order of the right to own property

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Dictionary definition of Poverty. The American Heritage® Dictionary of the English Language, Fourth Edition Copyright © 2004, 2000 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved.   More from Dictionary

Poverty: Barron's Business Terms

1. Relative measure within a society, being the state of having income and/or wealth so low as to be unable to maintain what is considered a minimum Standard of Living.

2. In absolute terms, having income and/or wealth too low to maintain life and health at a Subsistence level.

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Poverty: Houghton Mifflin Company

1. The condition of being extremely poor: beggary, destitution, impecuniosity, impecuniousness, impoverishment, indigence, need, neediness, pennilessness, penuriousness, penury, privation, want. See rich/poor.
2. The condition or fact of being deficient: defect, deficiency, deficit, inadequacy, insufficiency, lack, paucity, scantiness, scantness, scarceness, scarcity, shortage, shortcoming, shortfall, underage¹. See excess/insufficiency/enough.

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Thesaurus synonyms of poverty. The New Dictionary of Cultural Literacy, Third Edition Edited by E.D. Hirsch, Jr., Joseph F. Kett, and James Trefil. Copyright © 2002 by Houghton Mifflin Company. Published by Houghton Mifflin. All rights reserved.   More from Economics

Poverty Definition : Word Net

Poverty is the state of having little or no money and few or no material possessions

• Synonyms: poorness, impoverishment

• Antonym: wealth

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Poverty : Wikipedia [Webmaster's Choice]

Poverty is understood in many senses. The main understandings of the term include:

• Descriptions of material need, typically including the necessities of daily living, like (food, clothing, and shelter). Poverty in this sense may be understood as the deprivation of essential goods and services.

• Describing a lack of sufficient income and wealth. The meaning of "sufficient" varies widely across the different political and economic parts of the world.

• Descriptions of social need, such as social exclusion, dependency, and the ability to participate in society. This would include education and information. Social exclusion is usually distinguished from poverty, as it encompasses political and moral issues, and is not restrained to the sphere of economics.

Measuring poverty

Although the most severe poverty is in the developing world, there is evidence of poverty in every region. In developed countries, this condition results in wandering homeless people and poor suburbs and ghettos. Poverty may be seen as the collective condition of poor people, or of poor groups, and in this sense entire nation-states are sometimes regarded as poor. To avoid stigma these nations are usually called developing nations.

When measured, poverty may be absolute or relative poverty. Absolute poverty refers to a set standard which is consistent over time and between countries. An example of an absolute measurement would be the percentage of the population eating less food than is required to sustain the human body (approximately 2000-2500 kilocalories per day).

The World Bank defines extreme poverty as living on less than US$ (PPP) 1 per day, and moderate poverty as less than $2 a day. It has been estimated that in 2001, 1.1 billion people had consumption levels below $1 a day and 2.7 billion lived on less than $2 a day. The proportion of the developing world's population living in extreme economic poverty has fallen from 28 percent in 1990 to 21 percent in 2001. Much of the improvement has occurred in East and South Asia. In Sub-Saharan Africa GDP/capita shrank with 14 percent and extreme poverty increased from 41 percent in 1981 to 46 percent in 2001. Other regions have seen little or no change. In the early 1990s the transition economies of Europe and Central Asia experienced a sharp drop in income. Poverty rates rose to 6 percent at the end of the decade before beginning to recede. There are various criticisms of these measurements.

Other indicators of absolute poverty are also improving. Life expectancy has greatly increased in the developing world since WWII and is starting to close the gap to the developed world where the improvement has been smaller. Even in Sub-Saharan Africa, the least developed region, life expectancy increased from 30 years before World War II to a peak of about 50 years before the HIV pandemic and other diseases started to force it down to the current level of 47 years. Child mortality has decreased in every developing region of the world . The proportion of the world's population living in countries where per-capita food supplies are less than 2,200 calories (9,200 kilojoules) per day decreased from 56% in the mid-1960s to below 10% by the 1990s. Between 1950 and 1999, global literacy increased from 52% to 81% of the world. Women made up much of the gap: Female literacy as a percentage of male literacy has increased from 59% in 1970 to 80% in 2000. The percentage of children not in the labor force has also risen to over 90% in 2000 from 76% in 1960. There are similar trends for electric power, cars, radios, and telephones per capita, as well as the proportion of the population with access to clean water.

Relative poverty views poverty as socially defined and dependent on social context. In this case, the number of people counted as poor could increase while their income rise. A relative measurement would be to compare the total wealth of the poorest one-third of the population with the total wealth of richest 1% of the population. There are several different income inequality metrics, one example is the Gini coefficient.

In many developed countries the official definition of poverty used for statistical purposes is based on relative income. As such many critics argue that poverty statistics measure inequality rather than material deprivation or hardship. For instance, according to the U.S. Census Bureau, 46% of those in "poverty" in the U.S. own their own home (with the average poor person's home having three bedrooms, with one and a half baths, and a garage). Furthermore, the measurements are usually based on a person's yearly income and frequently take no account of total wealth. The main poverty line used in the OECD and the European Union is based on "economic distance", a level of income set at 50% of the median household income. The US poverty line is more arbitrary. It was created in 1963-64 and was based on the dollar costs of the U.S. Department of Agriculture's "economy food plan" multiplied by a factor of three. The multiplier was based on research showing that food costs then accounted for about one third of the total money income. This one-time calculation has since been annually updated for inflation.

Income inequality for the world as a whole may be diminishing.

Even if poverty may be lessening for the world as a whole, it continues to be an enormous problem:

• One third of deaths - some 18 million people a year or 50,000 per day - are due to poverty-related causes. That's 270 million people since 1990, the majority women and children, roughly equal to the population of the US.

• Every year nearly 11 million children die before their fifth birthday.

• In 2001, 1.1 billion people had consumption levels below $1 a day and 2.7 billion lived on less than $2 a day

• 800 million people go to bed hungry every day.

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Income Inequality : Wikipedia [Webmaster's Choice]

Income inequality metrics or income distribution metrics are techniques used by economists to measure the distribution of income among members of a society. In particular these techniques are used to measure the inequality, or equality of income within an economy. These techniques are typically categorized as either absolute measures or relative measures.

Absolute income criteria

Absolute measures define a minimum standard, then calculate the number (or percent) of individuals below this threshold. These methods are most useful when determining the amount of poverty in a society. Examples include:

• Poverty line - This is a measure of the level of income necessary to subsist in a society. It varies from place to place and from time to time, depending on the cost of living and people's expectations. It is usually defined by governments and calculated as that level of income at which a household will devote two thirds (to three quarters) of its income to basic necessities such as food, water, shelter, and clothing.

• Poverty index - This index was developed by Amartya Sen. It takes into account both the number of poor and the extent of their poverty. Sen defined the index as:

I = (P/N)(B − A)/A

where:

P = number of people below the poverty line

N = total number of people in society

B = poverty line income

A = average income of those people below the poverty line

Relative income criteria

Relative income measures compare the income of one individual (or group) with the income of another individual (or group). These measures are most useful when analyzing the scope and distribution of income inequality. Examples include:

• Percentile distributions - One percentile is compared to another. For example, it might be determined that the income of the top ten-percentile is only slightly more than the bottom forty-percentile. Or it might be determined that the top quartile earns 45% of the society's income while the bottom quartile has 10% of society's income. The interquartile range is a standard percentile range from 25% to 75%.

• Lorenz curve - This is a graphic device used to display the relative inequality in a distribution of income values. A society's total income is ordered according to income level and the cumulative total graphed.

• Gini coefficient - This is a summary statistic used to quantify the extent of income inequality depicted in a particular Lorenz curve.

• Robin Hood index - Mathematically related to the Gini coefficient, it measures the portion of the total income that would have to be redistributed in order for there to be perfect equality.

• Theil index - This is also a summary statistic used to measure income inequality, based on information entropy. It is similar to, but less commonly used than the Gini coefficient.

• Standard deviation of income - This measures income dispersion by assessing the squared variance from the mean. This metric is seldom seen, its use limited to occasional reference in academic journals.

• Relative poverty line - This is a measure of the number or proportion of people or households whose level of income is less than some given fraction of typical incomes. This form of poverty measurement tends to concentrate concern on the bottom half of the income distribution and pay less attention to ineqalities in the top half. See poverty line for details.

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Income Inequality : Wikipedia

Other Topics Related to Income Inequality

Defining income

Both of the above measures use income as the basis for evaluating poverty. However, 'income' is here understood different to a common understanding: It means the total amount of goods and services that a person receives, and thus there is not necessarily money or cash involved. If a poor subsistence farmer in Uganda grows her own grain it will count as income. Services like public health and education are also counted in. Often expenditure or consumption (which is the same in an economic sense) is used to measure income. The World Bank uses the so-called living standard measurement surveys (LSMS) to measure income. These consist of questionnaires with 200+ questions. Surveys have been completed in most developing countries.

Criticisms of income inequality metrics

1. It is not clear how income should be defined. Should it include capital gains, imputed house rents from home ownership, and gifts? If these income sources are ignored (as they often are), how might this bias the analysis? How should non-paid work (such as parental childcare) be handled? Wealth or consumption may be more appropriate measures in some situations. Broader metrics of human well-being might be useful.

2. Should the basic unit of measurement be households or individuals? The Gini value for households is always lower than for individuals because of income pooling and intra-family transfers. The metrics will be biased either upward or downward depending on which unit of measurement is used.

3. These income inequality metrics ignore life cycle effects. In most Western societies, an individual tends to start life with little or no income, gradually increase income till about age 50, after which incomes will decline, eventually becoming negative. This will have the effect of significantly overstating inequality. It has been estimated (by A.S. Blinder in The Decomposition of Inequality, MIT press) that 30% of measured income inequality is due to the inequality an individual experiences as they go through the various stages of life.

4. Should real or nominal income distributions be used? What effect will inflation have on absolute measures? Do some groups (eg., pensioners) feel the effect of inflation more than others?

5. How do we allocate the benefits of government spending? How does the existence of a social security safety net influence the definition of absolute measures of poverty. Do government programs support some income groups more than others?

6. Income inequality metrics are seldom used to quantify and examine the causes of income inequality. Some alleged causes include: life cycle effects (age), inherited characteristics (IQ, talent), willingness to take chances (risk aversion), the leisure/industriousness choice, inherited wealth, economic circumstances, education and training, discrimination, and market imperfections.

These criticisms help to understand the problems caused by the improper use of inequality measures. However, they do not render inequality coefficients invalid. If inequality measures are computed in a well explained and consistent way, they can provide a good tool for quantitative comparisons of inequalities at least within a research project.

Benefits and costs associated with Income inequality

In many capitalist countries there undeniably is a marked level of inequality in income distribution. This could be defined as having a gini coefficient of over .25 - but even that is a generous allowance of inequity. Whilst if all resources were put toward creating a more equitable distribution of income, relative equality, or a least a 'fairer' distribution could be achieved. However, this is very rarely done, and there are economic reasons for this.

Optimal Level of Inequality

In their study for the World Institute for Development Economics Research, Giovanni Andrea Cornia and Julius Court (2001) reach policy conclusions as to the optimal distribution of wealth. The authors recommend to pursue moderation also as to the distribution of wealth and particularly to avoid the extremes. Both very high egalitarianism and very high inequality cause slow growth. Extreme egalitarianism leads to incentive-traps, free-riding, high operation costs and corruption in the redistribution system, all reducing a country's growth potential. [see Gini-Growth curve here]

However also extreme inequality diminishes growth potential through the erosion of social cohesion, increasing social unrest and social conflict causing uncertainty of property rights. Therefore public policy should target an 'efficient inequality range'. The authors claim that such efficiency range roughly lies between the values of the Gini coefficients of 25 (the inequality value of a typical Northern European country) and 40 (that of countries such as China and the USA). The precise shape of the inequality-growth relationship depicted in the Chart obviously varies across countries depending upon their resource endowment, history, remaining levels of absolute poverty and available stock of social programs, as well as on the distribution of physical and human capital.

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