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).

In a UK context, the government uses a measure of absolute poverty (before and after housing costs) defined as living in a household with income below 60% of the 2010/11 median income, adjusted for inflation. This is a fixed threshold that only changes with inflation, not with rising average incomes.

Relative Poverty

Key Definition: Relative poverty is a condition where an individual or household has an income significantly below the average for the society in which they live. It is a measure of inequality rather than deprivation in an absolute sense.

The standard UK measure defines relative poverty as living in a household with income below 60% of the contemporary median household income (equivalised for household size).

Poverty Measure	Threshold (2022/23, after housing costs)
Relative poverty line (60% median)	Approximately £17,100 for a couple with no children
Absolute poverty line (60% of 2010/11 median, inflation-adjusted)	Approximately £15,500 for a couple with no children

Source: DWP Households Below Average Income (HBAI)

UK Poverty Data (2022/23)

Measure	Number of People	Percentage of Population
Relative poverty (AHC)	11.7 million	18%
Absolute poverty (AHC)	11.0 million	17%
Children in relative poverty (AHC)	3.6 million	26%
Pensioners in relative poverty (AHC)	1.8 million	14%

Source: DWP HBAI 2022/23

Exam Tip: AHC = After Housing Costs; BHC = Before Housing Costs. Poverty rates are always higher AHC because housing costs take a larger share of income for poorer households. Use AHC figures for a more accurate picture of living standards, but be prepared to explain why the two measures differ.

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The Debate: Absolute vs. Relative Poverty

Absolute Poverty	Relative Poverty
Fixed threshold — measures whether basic needs are met	Moving threshold — rises as median income rises
Falls as economic growth raises incomes	Can remain constant (or rise) even during economic growth
Better for international comparisons and long-run trends	Better for assessing social exclusion within a specific society
Criticised as too narrow — ignores social participation	Criticised as really measuring inequality, not poverty
Supported by economists who emphasise growth as the solution to poverty	Supported by sociologists and those who emphasise relative deprivation

Peter Townsend (1979) in Poverty in the United Kingdom argued powerfully for the relative definition. He defined poverty as:

"Individuals, families and groups in the population can be said to be in poverty when they lack the resources to obtain the types of diet, participate in the activities and have the living conditions and amenities which are customary, or at least widely encouraged or approved, in the societies to which they belong."

Townsend's definition goes beyond material deprivation to include social exclusion — the inability to participate in the normal activities of society (e.g., a child unable to attend a school trip, a family unable to invite friends for a meal).

Amartya Sen (1999) in Development as Freedom took a capabilities approach, arguing that poverty should be understood as a lack of capabilities — the freedom to achieve valued functionings such as being well-nourished, being educated, and participating in social life. This approach combines elements of both absolute and relative definitions.

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Causes of Poverty

Immediate Causes

Cause	Explanation	UK Context
Unemployment	Loss of earned income	UK unemployment rate approximately 4.2% (2023); higher in deprived areas
Low wages	In-work poverty — earning insufficient income despite employment	61% of people in poverty live in working households (JRF, 2023)
Part-time or insecure work	Zero-hours contracts, gig economy work	Approximately 1.1 million workers on zero-hours contracts (ONS, 2023)
Disability and ill health	Reduced ability to work; additional living costs	Disability poverty rate: 27% (after housing costs)
Caring responsibilities	Predominantly affects women; limits working hours	5.7 million unpaid carers in England and Wales (Census 2021)
Relationship breakdown	Loss of economies of scale; single-parent households face higher poverty risk	44% of children in single-parent families are in relative poverty
Inadequate benefits	Benefits may not cover basic living costs	Universal Credit standard allowance for a single person over 25: £91.40/week (2023/24)

Structural Causes

1. The cycle of deprivation (Keith Joseph, 1972)