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In this updated revision video, we look at the important concept of relative poverty.
Our focus will be on income but please keep in mind that relative poverty is multi-dimensional, and that income is a narrow albeit important focus
What is relative poverty?
Relative poverty is household income considerably lower than the median income within a country. The relative poverty line is usually household disposable income of less than 60% of median income.
Median per capita income reveals the progress of a ‘typical’ person in society and is not influenced to what happens at the tails of the distribution for the lowest and highest income families.
How can we measure relative poverty?
A common relative poverty measure is the percentage of population living below 60% of median disposable household income
Relative poverty might also include relative differences in consumption and access to essential services and products (though this involves making a value judgement)
Relative poverty also measured by conventional indicators of income and wealth inequality such as the Gini Coefficient and the Palma Ratio
Gini coefficient: The Gini coefficient measures how equally income is distributed in a society, where 0 = perfectly equal, 1 = when all income goes to 1 person
Palma Ratio: Ratio of the income of richest ten percent of households to the income of the poorest forty percent of people
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