National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Absolute and Relative Thresholds

« Previous: Increase in the Standard of Living
Suggested Citation:"Absolute and Relative Thresholds." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 31

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

INTRODUCTION AND OVERVIEW 31 changes in total consumption, which includes spending on luxuries as well as necessities. One may also question whether a poverty threshold should remain fixed in real terms, so that it progressively declines in relation to the standard of living, not only overall but for such necessities as food and housing. ALTERNATIVE POVERTY MEASURES AND CRITERIA FOR A MEASURE In this section we first consider different approaches to constructing poverty thresholds. We then consider the definition of family resources, which is the other side of the calculation needed to determine if a given person or family is poor. Establishing a poverty measure also requires that several other issues be addressed, particularly the time period, the unit of analysis, and how information about those in poverty is presented; these are treated below (see "Other Issues in Poverty Measurement"). Last, we present three criteria that we believe are critical in assessing any measure of poverty for consideration as the official U.S. measure. Types of Poverty Thresholds Absolute and Relative Thresholds The literature often distinguishes between "absolute" and "relative" poverty thresholds. Absolute thresholds are fixed at a point in time and updated solely for price changes; relative thresholds are updated regularly (usually annually) for changes in real consumption. In this sense, the U.S. measure is an absolute one. Absolute thresholds generally carry the connotation that they are developed by "experts" with reference to basic physiological needs (e.g., nutritional needs). In contrast, relative thresholds, as commonly defined, are developed by reference to the actual expenditures (or income) of the population. A typical approach is to select a cutoff point in the distribution of total family expenditures or income adjusted for family composition—say, one-half the median—and designate that dollar amount as the poverty threshold for a reference family, with thresholds for other family types developed by use of an equivalence scale. The European Community often uses relative thresholds to facilitate cross-national comparisons (see, e.g., O'Higgins and Jenkins, 1990).7 One criticism of relative thresholds is that the choice of the expenditure or income cutoff is arbitrary or subjective, rather than reflecting an objective 7 Most developed countries do not have official poverty measures (see Will, 1986). However, studies of poverty have been carried out in most countries using various measures developed by researchers or social welfare policy analysts.

Next: Expert Budgets: The U.S. Experience »
Measuring Poverty: A New Approach Get This Book
Buy Paperback | $75.00 Buy Ebook | $59.99
MyNAP members save 10% online.
Login or Register to save!
Download Free PDF

Each year's poverty figures are anxiously awaited by policymakers, analysts, and the media. Yet questions are increasing about the 30-year-old measure as social and economic conditions change.

In Measuring Poverty a distinguished panel provides policymakers with an up-to-date evaluation of:

  • Concepts and procedures for deriving the poverty threshold, including adjustments for different family circumstances.
  • Definitions of family resources.
  • Procedures for annual updates of poverty measures.

The volume explores specific issues underlying the poverty measure, analyzes the likely effects of any changes on poverty rates, and discusses the impact on eligibility for public benefits. In supporting its recommendations the panel provides insightful recognition of the political and social dimensions of this key economic indicator.

Measuring Poverty will be important to government officials, policy analysts, statisticians, economists, researchers, and others involved in virtually all poverty and social welfare issues.

  1. ×

    Welcome to OpenBook!

    You're looking at OpenBook,'s online reading room since 1999. Based on feedback from you, our users, we've made some improvements that make it easier than ever to read thousands of publications on our website.

    Do you want to take a quick tour of the OpenBook's features?

    No Thanks Take a Tour »
  2. ×

    Show this book's table of contents, where you can jump to any chapter by name.

    « Back Next »
  3. ×

    ...or use these buttons to go back to the previous chapter or skip to the next one.

    « Back Next »
  4. ×

    Jump up to the previous page or down to the next one. Also, you can type in a page number and press Enter to go directly to that page in the book.

    « Back Next »
  5. ×

    To search the entire text of this book, type in your search term here and press Enter.

    « Back Next »
  6. ×

    Share a link to this book page on your preferred social network or via email.

    « Back Next »
  7. ×

    View our suggested citation for this chapter.

    « Back Next »
  8. ×

    Ready to take your reading offline? Click here to buy this book in print or download it as a free PDF, if available.

    « Back Next »
Stay Connected!