Income inequality metrics and/or Poverty

In economics

A measure of relative poverty definines "poverty" in some way which depends on the income or standard of living of entities who are not considered poor (by whatever formula is being used). For example, the number of households who earn less than 25% of the median income is a measure of relative poverty.

This contrasts with "absolute" measures, which compare entities against a fixed income level or fixed standard of living.

See Income inequality metrics for a discussion of various measures of both kinds.

Sometimes those with the very highest income levels or standards of living are excluded from relative forumlas. For example, the OECD and European Union often use a poverty line based on 60% of the median equivalised net household income in individual countries. This has the effect of comparing the poorest in each society with those in the middle.

A population will have a low level of poverty if measured on an absolute scale (in the sense of a fixed cutoff point) even if a large cluster of people are "stuck" just above the poverty line. If absolute measures alone are used to guide social policy, then success will mean improving the conditions of the impoverished at least enough to put them slightly above the poverty line. However, it would not be necessary for their incomes to keep pace with the median or mean income level, because as long as they were above the cutoff point, they would no longer be considered in need of assistance. Relative measures may be more appropriate to use when it is considered important to avoid this.

On the other hand, relative measures may indicate that a society is doing well, even if some people to be "left behind" at very low income levels. For example, it might be considered appropriate to sacrifice promotion of some households from slightly above the poverty line to near the median income, so that other households may be saved from starvation or homelessness due to their even lower incomes. In these situations, absolute measures may be more appropriate to determine whether or not this is happening. Some more sophisticated relative measures are designed to reflect the changing welfare of both the most impoverished and the slightly less poor.

Moderate poverty

The phrase relative poverty can also be used to describe a standard of living or level of income which is higher than what is needed to satisfy basic needs (like water, food, clothing, shelter, and basic health care), but which is still significantly lower than that of the majority of the population under consideration.