Absolute and Relative Poverty Video Lecture | Economics Class 12 - Commerce

- [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.