poverty: Poverty is the condition of people who lack adequate income and wealth.

absolute poverty: People are absolutely impoverished if the minimum amounts of food, clothing and shelter necessary for survival absorb all of their income, and they live a razor’s edge existence.

relative poverty: People are relatively impoverished if the customary (average) standard of living in their society requires more spending than the income they have available. This standard changes as a society becomes more prosperous. For example, the standard of living average Americans experienced in 1900 was below the poverty threshold (guideline) estimated by the US Department of Health and Human services in 2000.

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Relative Poverty

Friend:       How’s your spouse?

Economist:   Relative to what?

An Unknown Pundit

This quip reflects a tendency among economists to measure almost everything relative to some alternative. Poverty, which is a “lack of wealth or material comfort,” is no exception. Everyone might agree that anyone without the physical means to sustain normal life is absolutely impoverished, but beyond that definition, poverty seems a relative concept determined by time and place. For example, many Americans below our official “poverty line” have amenities enjoyed only by the wealthy in less developed countries and seem prosperous relative to beggars and slum dwellers in some countries.

Consider how standards of living have changed over the centuries. The average lifespan of Europeans who survived childhood 1,000 years ago was less than 35 years. In 1900, the average American could expect to live only 49 years, but people in many developed economies now typically live well into their 70s because of advances in nutrition and medicine. Polio, cholera, smallpox, diphtheria, and leprosy are now extinct or quite rare in developed economies. Canning and refrigeration make it possible to store food for long periods, and the globalization of commerce has enriched diets throughout the world. Even the nobility of medieval times did not have access to things that many Americans who are classified as poverty-stricken take for granted: aspirin, fast-food restaurants, telephones, running water, automobiles, electric lighting, indoor plumbing, garbage collection, paved roads, public education and transportation, antibiotics, grocery stores, “painless” dentistry, television, and central heating for their homes---this list could be extended for several pages.

Some Americans at society’s bottom rungs – the homeless – do lead miserable lives, but for those in a position to receive food stamps and transfer payments, “life on the dole” is at least physically tolerable. Suppose you had to choose between (a) the physical comforts of a typical U.S. family relying on welfare for all its income in 2004, and (b) the standard of living enjoyed by noble members of King Arthur’s court. If you ignore the trappings of power enjoyed by feudal nobility, we suspect that you would be reluctant to trade the range of choices available to most poor Americans for life in a damp and drafty castle.

This does not mean that poor Americans have a soft life. There is no doubt that the most destitute people in our society are often homeless, cold, and hungry. Our point, instead, is that poverty is in part determined by cultural norms, of which material comforts are only one dimension. Wealth and income ultimately provide their holders with freedom, power, and deference from others. Poor people have relatively less power and fewer choices over their lives.