Why do people relate to poverty
In the economic and socio-political discussion, the term poverty describes a lack of financial resources or essential goods from which individuals or groups of people suffer. A distinction is made between absolute and relative poverty.
Absolute poverty (physical poverty) is when people have an income below the subsistence level. This means that they cannot meet their basic needs - such as food, clothing and shelter. According to the World Bank, this poverty threshold is 1.90 US dollars (in purchasing power parities) per day. Absolute poverty has in fact been overcome in developed and highly developed countries.
Relative poverty exists when there is an income below the socio-cultural subsistence level. According to the definition of the Council of the European Community of 1984, people are considered to be poor “if they have so little material, cultural and social resources that they are excluded from the minimum acceptable way of life in the member state in which they live "Poverty is therefore relative in two respects: It depends on the standard of living in a certain society and on the point in time at which this standard of living prevails. The socio-cultural subsistence level is calculated using a normatively defined percentage of the needs-weighted mean household net income of the total population (median income). In European social reporting, this limit is set at 50 percent of median income. Even at a threshold of 60 percent, an increased risk of poverty is assumed. This so-called poverty risk limit, which is based on 60 percent, is also used in the poverty and wealth report of the federal government ver turns.
In its calculations, DIW Berlin mostly follows the conventions of the EU and the poverty and wealth report of the federal government. According to the SOEP data, the threshold above which there is a relative risk of income poverty was around 1050 euros per month in Germany in 2014 for a one-person household. In 2014, just under 16 percent of the entire population was below this threshold, that is over twelve million people.
Different income concepts can be used to determine relative poverty. According to the recommendations of Canberra Group annual incomes are to be used for income distribution analyzes. Since the annual income can only refer to the year before the respective survey time, the monthly income is also used as an alternative. However, fluctuations in income during the year and irregular income components such as investment income or bonuses are not adequately recorded. In addition to taking into account regional price levels or fictitious income components such as the rental value of owner-occupied residential property, there are other aspects that are relevant when measuring poverty. This abundance of variables explains why many poverty statistics and reports come to different results.
In the case of a multi-dimensional recording of the risk of poverty that goes beyond the mere income level, a large number of indicators are used. DIW Berlin mostly uses the so-called Laeken indicators, which are also recommended by the European Commission and the Statistical Office of the European Union (Eurostat).
See also equivalised income
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