Question

What is the poverty line?

Short answer

The poverty line is a monetary value representing the minimum income required for an individual or family to meet their basic needs like food, clothing, and shelter. It can be measured as an absolute or relative value. The absolute poverty line calculates the minimum cost of basic goods and services necessary for survival, while the relative poverty line sets a percentage of the median income as the threshold, typically around 50-60%. The poverty line is an important tool for monitoring poverty levels and designing policies to help vulnerable populations, but it has limitations, as it doesn't capture multidimensional aspects of poverty and may oversimplify comparisons between regions and countries.

Step-by-step solution

Definition of Poverty Line

The poverty line, also known as the poverty threshold or minimum income level, is a monetary value that represents the minimum income required for an individual or family to meet their basic needs like food, clothing, and shelter. It is a measure used by governments and organizations to determine the number of people living in poverty and the effectiveness of policies to address poverty.

Measuring and Calculating Poverty Line

The poverty line is measured in two ways: absolute and relative poverty lines. Absolute poverty line: This method is based on calculating the minimum cost of a basic basket of goods and services necessary for an individual or family to meet their basic needs. This cost can be different across countries and regions due to variations in living costs and consumption patterns. An widely known example of an absolute poverty line is the World Bank's international poverty line, which is currently set at \(1.90 purchasing power parity (PPP) per day. This means that any person living on less than \)1.90 a day, adjusted for differences in purchasing power, is considered to be living in poverty. Relative poverty line: This method considers the poverty line as a percentage of the median income of a country, typically around 50-60% of the median income. Individuals or families with incomes below this relative poverty line are considered to be living in poverty. This approach is particularly useful in measuring income inequality and poverty within developed countries, where the focus is more on social inclusion and reducing disparities among the population.

Importance and Limitations of Poverty Line

The poverty line is an important tool for policymakers and researchers to monitor and evaluate poverty levels, identify the most vulnerable population groups, and design effective policies and programs to help them. However, it has its limitations, such as it doesn't capture the multidimensional aspects of poverty, like access to education, health, and other social services. Additionally, the poverty line can be criticized for being too simplistic, especially when comparing poverty across different regions and countries with varying economic and social contexts.