Relative Poverty - 2021 Revision Update

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