Iceland (2013) defines relative poverty as a “comparative economic deprivation” and says that “it is based on the notion that poverty is relative to a society’s existing level of economic, social and cultural development”. Iceland then converges with Poverty.org.uk in that both of them think that relative poverty is relevant, because it hinders the capability of households whose income is significantly lower than the average to partake in “ordinary living patterns, customs and activities” (Poverty.org.uk, W/D). Poverty.org.uk also notes that if a significant amount of families fall below the poverty line it affects society as a whole, as this issue results in less social cohesion.
The concept of relative poverty is useful in poverty analysis at large, as combined data on relative and absolute poverty can show how the global economy is moving. In other words, if the data shows constant levels of relative poverty and diminishing levels of absolute poverty, this is most likely a sign of economic growth. However, “if relative poverty has decreased, the data may be suggestive of a world economic system that has moved in a pro-poor direction whether by design or by accident” (Nilsen, 2009). This can be explained by the methods used to measure relative poverty, in which a household is considered poor if its income is less than a certain percentage of the average national income (e.g. less than 60% of the average national income for countries in the EU). Combining this with Nielsen’s affirmation, one is left with an economy where the income inequality between the low-income families and the non-poor ones is smaller merely because the national income level has contracted.
APPLICABILITY: ABSOLUTE POVERTY VS. RELATIVE POVERTY
Despite coming in handy to determine economic growth and/or stunting, in places where both absolute and relative poverty exist, relative poverty is often deemed unimportant and hence ignored. The reason behind this is that although it is largely measured by income-related data, relative poverty also involves a social component (as mentioned above) associated to the quality of life of the poor and the alienation they might suffer. These things are not considered a priority when the very existence of individuals is at stake, as is the case of people living in absolute poverty.
This works in both ways, as absolute poverty is not often measured in rich countries. According to Poverty.org.uk, this is mainly because there is no definitive way to establish an absolute poverty threshold, since the poor in those countries do not depend on income as low as the 1 or 2 dollars per day that constitute the global absolute poverty line.
The general consensus seems to be, then, that relative poverty levels are measured in rich countries and those in the late stages of development, while absolute poverty is measured in third world countries, where people living on less than the bare minimum to survive still abound.