What is relative poverty?

The UK is still reeling from the effects of austerity measures brought in after the financial crash in 2008. The country is on track to reach a record high level of child poverty and Universal Credit is pushing people further into financial hardship. But when figures frequently reported refer to ‘absolute’ and ‘relative’ poverty, what do they mean?

Relative poverty

The criteria of relative poverty is in flux and depends on the economy, unlike absolute poverty. It looks at how many people have been financially left behind, those who can scrape by on the basics but who cannot afford the normal activities and opportunities that average earners have access to, known as an ‘ordinary living pattern’. Over 14 million people in the UK fit this criteria.

Households in relative poverty earn 60 per cent of the median earnings at the time, though the figures are adjusted according to how many people are in a household since their income needs will differ.

For example, a two-parent family with two children currently needs to earn £20,852 in order to stay out of relative poverty. For a single parent with two children, they need to earn £1,287 a month. But no adjustments are made for disability or care responsibilities.

Absolute poverty

Absolute poverty means something different, depending on who you ask. The definition adopted by the UN means someone cannot afford basic essentials like food, clothing and housing. This measure makes it easier to compare conditions between countries – as the minimum income to keep up with basic living standards differs depending on where you are.

It also helps to compare poverty levels at different points in time as the accepted necessities are likely to shift. Quality of life or inequality arguments tend not to factor in when using absolute poverty as a measure.

But the UK government takes a different approach. Westminster defines absolute poverty as income worth less than 60 per cent of the median annual earnings in 2010-11.

Some organisations make other adjustments to better reflect the reality behind a household income. The Department for Work and Pensions, for example, calculates poverty levels both before and after housing costs, because housing costs vary wildly across the country (and are pushing more people into poverty as prices soar).

Last year, the Social Metrics Commission devised a new poverty metric intended to better account for the inescapable costs that eat into people’s incomes, like childcare and expenses linked to living with disability.

The commissioners also factored in liquid assets, like savings and shares, that could act as a safety net for those who might otherwise be at risk of falling into poverty.

The new metric, designed to expose the reality of poverty in the UK, helped researchers discover that many groups are underrepresented under other ways of gathering poverty data. Nearly half of people in poverty live in families with a disabled person.

You can work out where you fit in using this interactive tool from the Office for National Statistics.