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Concept and Measurement of Poverty

The definition of poverty is value-laden and culturally influenced and thus defies consensus. Nevertheless, broadly speaking, the myriad of definitions adopted generally fall into the following categories -

  • Poverty is having less than an objectively defined, absolute minimum.
  • Poverty is having less than the others in society, in relative terms.
  • Poverty is feeling you do not have enough to get along (subjective poverty).

Absolute Poverty

The absolutist approach to defining poverty follows the concept of minimum subsistence; that is, those with means inadequate to afford a bundle of goods and services that are regarded as essential to the physical need of an individual or a family are considered “poor”. The limitation of this approach is that it focuses on physical needs rather than social needs. What to include in the bundle of “necessities” and how each component should be evaluated involve subjective judgment and are contentious.

Relative Poverty

People are living in relative poverty when they lack the resources to obtain the type of diets, participate in the activities and have the living conditions and amenities which are customary in the societies to which they belong. The usual measurement of relative poverty is a proportion of the median income in the society. The greatest merit of this approach is its relative simplicity in administration. However, assessment based on income does not fully take into consideration the actual consumption needs of the poor. For instance, it does not take into account non-income benefits provided by the Government and other non-governmental organisations. The determination of the proportion of the median income (e.g. 50%, 60%) is also unavoidably arbitrary.

Other Approaches

Two other methods measure poverty from a more subjective/social approach, namely the budget standards method and the income proxy method. The budget standards method follows the absolutist approach but incorporates various socially determined essential needs.

The income proxy method adopts a behaviourist approach in determining a proper proportion of expenditure on necessities based on the consumption patterns of the comparable segments of the society (i.e. those who spend more than X% of their family expenditure on necessities are considered poor). As is the case with the absolutist approach, determining needs and quantifying them inevitably involve controversial value-judgments.

Commission Secretariat




2005| Important notices Last revision date:9 Jan 2006