Poverty: Absolute and Relative

Poverty is one of the most important and emotive topics in economics. Despite being one of the wealthiest nations in history, the UK has millions of people living in poverty. Understanding how poverty is defined, measured, and caused is essential for evaluating government policy and for answering A-Level essay questions with the depth and nuance that examiners require.

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Defining Poverty

There are two fundamentally different approaches to defining poverty:

Absolute Poverty

Key Definition: Absolute poverty is a condition where an individual or household lacks the income to afford the basic necessities of life — food, shelter, clothing, clean water, and sanitation. The poverty line is fixed in real terms and does not change as average incomes rise.

The World Bank defines extreme absolute poverty as living on less than $2.15 per day (at 2017 purchasing power parity). By this measure, fewer than 1% of people in the UK live in absolute poverty — but millions do globally (approximately 700 million people in 2023).