Absolute Poverty: Meaning, Types, Causes, Consequences

Absolute poverty is a condition when a person has an income lower than a decent standard of living, measured by a poverty line standard. They are considered unable to fulfill the necessary goods and services (such as shelter, food, and clothing).

For example, a country may adopt a poverty line standard of US$1 per day. So, those who are lower than the number belong to the absolute poverty group. This standard does not change and not revised for several years.

As an international benchmark, the world bank renewed the standard of the international poverty line of US$1.90 per day in 2015. In that year, globally, those living on less than US$1.90 per day reached more than 700 million people.

Next, in 2018, the world bank also refers to extreme poverty as those who have income less than US$1.9 based on purchasing power parity (PPP) in 2011, or if converted to 2018, it will be equivalent to US$2.12.

As inflation affects the purchasing power of individuals, the poverty line would change over time. In international standards, for example, the World Bank initially set US$1 a day as the line. Still, in 2015, they revised it to US$1.9 a day.

Types of poverty

Two common terms of poverty: absolute and relative. As the definition above, absolute poverty is based on the nominal standard (poverty line). Below-the-line individuals are absolutely miserable. They are considered unable to meet their basic needs.

Meanwhile, relative poverty is based not on nominal, but the percentage from a certain standard. For example, households fall into the category of relative poverty when they receive 60% less than the average household income. They are poor because they are below the average. 

Relative poverty can also change along with economic growth, in contrast to absolute poverty. When the economy expands and increases household income, relative poverty will tend to decrease.

In addition to the two, there are also some poverty terms. For example, Eric Jensen, in his book “Teaching with Poverty in Mind,” divides poverty into situational, generational, absolute, relative, urban, and rural areas.

Causes and consequences of absolute poverty

Many factors cause absolute poverty, including conflict, weak education system, disability, injustice, slavery, war, oppression, and limited government capacity. Poor infrastructure and prolonged unemployment are also responsible for the lack of basic services and citizens’ incomes.

If we associate it with savings, poverty causes low national saving rates. This situation ultimately impeded investment and economic development. Understandably, household savings are an essential source of loanable funds in the economy. Weak economic development ultimately prolongs poverty.

Poverty is also responsible for increased crime rates. It also forces individuals to struggle with hunger, chronic food insecurity, and malnutrition. Combined with low health, this ultimately leads to short life expectancy.