Poverty Threshold

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Poverty is defined by Erenstein et al (2002) as "the failure to meet the minimum adequate level required to satisfy certain vital functions". This poverty definition goes beyond the basic needs a household has to meet in order to survive —it acknowledges the social nature of man and what he needs to feel truly whole. However, a holistic view of poverty is oftentimes too intricate to be employed in the statistic analyses used to identify the poor. It encompasses too many different variables and thus cannot be measured effectively. Therefore, in statistic analyses, a parameter is employed to separate the poor from the non-poor. This parameter is called the poverty threshold.


In terms of absolute poverty, a poverty threshold is "the officially determined minimum income needed by a family to obtain a specific bundle of privately provided food and basic services"(Dixon and Macarov, 1998). The absolute poverty threshold is invariable once established, except for the cost of this "bundle" of food and services—also called a nutritional basket. Sometimes services are overlooked and the cost of the nutritional basket is calculated solely in terms of meeting a predetermined food energy requirement. However, it is more common to do poverty threshold calculations based on food regularly consumed by the local poor, adding on top an amount for nonfood goods.

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When measuring relative poverty, however, the above mentioned definition does not have much room. The reason is that relative poverty takes place when a household is living well below the acceptable living standard of the society they are part of. This puts them at a disadvantage that can lead to exclusion from society, but does not generally represent a scarcity so severe that it can be potentially fatal for those living in it. This ellicits the need for a poverty threshold that better represents the reality the underprivileged are experiencing. In this sense, the relative poverty threshold is often considered as living with an income under certain percentage of the median national income. In the European Union, for example, this percentage is 60% —with people living below it considered to be "at risk of monetary poverty" (EAPN, W/D)

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