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Absolute and relative poverty

Video transcript
- [Voiceover] There are two different ways that we could think about poverty. The first way is: Is the poverty so bad as to threaten the survival of the person? Or, is the poverty such as to basically exclude them and sideline them from society? So let's have a look at this graph on the vertical axis. Let's label that as Resources. Now, we have to think that there must be a minimum level of resources a human being needs in order to survive. And let's draw an arbitrary line on this graph. Let's draw this line here. And when we mention resources, the kind of things I'm talking about are shelter, food, and water, including things like sanitation. So anything really that falls below this line is really threatening survival. Now, when we mention resources, one of the things that we can think about is we could think about it as resources or we could think about it as level of income. And you may have actually heard the term "Many people are living below one dollar a day "or two dollars a day." So oftentimes, we actually use the level of income to denote this minimum level of resources that are needed. Now, what we're talking about here is a specific idea, that idea of absolute poverty. And absolute poverty has an absolute value associated with it, an absolute level at which if you go beneath it, survival is threatened. One of the things that absolute poverty also kind of brings up is the fact that this level applies no matter where you are. So when we say, "Absolute poverty is one "to two dollars a day," that could be whether you live in Africa, Canada, or even the Arctic. And that also opens us up to a degree of debate, because what we do know is that, really, we're using these arbitrary income or resource cutoffs, but people living in the Arctic, for example, will require perhaps a lot more resources. The minimum resources are probably much higher because they have to have a lot of heating expenses, it's much hard to find food. So really, there is a degree of real-life variability that absolute poverty may not really consider. So let's go back to this line, this absolute poverty line. And let's look at the horizontal axis and label this as Time. And over time, this is an absolute line, so it just continues, really unchanged, unless we decide to redefine it. And this, again, is our absolute poverty line. So one of the things that can potentially happen in a society is that the median level of income, the average or the middle level of income in a society, particularly a developing or poor country, can gradually rise as a country gets richer. And when it does so, we find that less and less people may, as either as a number or as a proportion, may live in absolute poverty, and more and more people will live above this absolute poverty line. So one of the things that we can see is that if, in general, a society is becoming richer, as to say kind of equally becoming more wealthy, that may very well lead to a decrease in absolute poverty. So, really, when we think about absolute poverty, we're talking about these really small numbers, one to two dollars, and we're really focusing on developing countries. But let's think about developed countries and countries where the income levels and resource levels are actually much higher. Do they have any poverty? Now, we've got a very, very similar graph. And, again, on the vertical axis, we're going to put Resources, and on the horizontal axis, we're going to put Time. And what we have previously mentioned is that absolute poverty line. So let's draw that in here. And, really, that absolute poverty line can be different values and different definitions. And different organizations can define it based on income or resources and define it differently. Okay. Now, let's consider the United States. So instead of thinking about one or two dollars a day, in the United States, the median per person income is actually above 80 dollars a day. So it could actually be much higher on this level. So the resource level of those individuals is actually much higher than this absolute poverty line. So does that mean that we don't have any people living in poverty in the United States? This is where things can actually change because we can use a different marker now. Instead of saying absolute poverty and thinking about poverty as being different arbitrary cutoffs such as one or two dollars a day, why don't we start to think about poverty as actually being ... Why don't we think about poverty as being a level, a percentage level below the median income of a country? So in this case, why don't we think about the concept of relative poverty? I'm going to draw a line and say ... There's different definitions, but let's define a relative poverty line as to say it's less than 60% of the median income. So much higher than this absolute poverty line, but it's actually linked to a country's income. And one of the things that we can see now is that if a country's income, for example, rises up, well, the absolute poverty line would not change, unless we redefine it. A median income level would, if that income rise in the country is distributed equally, would tend to also keep track, would tend to increase alongside. So people will continue to live in this relative poverty. One of the important things to think about relative poverty is that what we're saying is relative poverty is not talking about survival because that is absolute poverty. What relative poverty is talking about is people whose incomes are so low in their own society that they're basically being excluded from society or being sidelined because their income levels are too low. So even if, for example, they're earning 20 dollars a day, which is much more than the absolute poverty line, they're still not able to participate in society to have a meal, to engage in the educational process, to gain suitable transport, in societies where the median income per person, and I should put that down here, is actually, this is per person, is much higher. So this really separates out this absolute poverty line, which is a measure across all countries, and it tends to be a single standard, from this relative poverty, which is related to the society or the country or the environment where an individual is living. Absolute poverty focuses on survival, the basic necessities of life, whereas relative poverty really talks about being excluded from society. And relative poverty can track with a country's per person income going up and down, whereas absolute poverty tends to stay the same.