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Poverty facts for kids

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A boy playing with garbage in Jakarta, Indonesia.
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A homeless woman with her dog in a street of Rome

Poverty means not having enough money for basic needs such as food, drinking water, shelter, or toiletries. Many people in different countries live in poverty, especially in developing areas of West and Sub-Saharan Africa, Latin America, Caribbean and some parts of Asia.

There are different ways to measure poverty. The World Bank says that extreme poverty is when someone has less than US$1 a day to live on (that dollar is an ideal one). It has been changed to rule out certain effects such as inflation, meaning that prices of things rise higher than what a person is paid, and other price level differences. Moderate poverty is when people have to live on less than $2 a day. In the year 2001, 1.1 billion people were seen as extremely poor, and 2.7 billion were seen as moderately poor.

In the developed world this does not apply. There, many people are seen as the working poor. They have a job, but do not earn enough money for basic things such as food and a home. In most developed countries, people without jobs receive money from the government, but this is often less than what they need for a comfortable life.

There are different ways to tell if a country is rich or poor. The Gross Domestic Product, or GDP, and Human Development Index, or HDI, are two of those measures. Gross Domestic Product is the money made from trade from inside the country.

HDI, meaning the Human Development Index is a different matter. It is determined by life expectancy and adult literacy rates. Places in Africa like Guinea-Bissau, Sierra Leone and Mali are the poorest, with Sierra Leone having the lowest HDI ranking in the world.

Poverty is a hurdle in the way of a country's progress. One way of helping lower poverty is by educating poor people so that they can start contributing to a nation's economic development. Education teaches the poor about their rights and may show them the path to become an important part of the growth and expansion of the country. Vienna Declaration also tells this fact.

One of the most important things that is needed to make a country richer is for the Government to want to help poor people do better. Without this, it is hard for people to become better off.

Measuring poverty

Children of the Depression-era migrant workers, Arizona, United States, 1937

Absolute poverty

Absolute poverty, often synonymous with 'extreme poverty' or 'abject poverty', refers to a set standard which is consistent over time and between countries. This set standard usually refers to "a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services." Having an income below the poverty line, which is defined as an income needed to purchase basic needs, is also referred to as primary proverty.

The "dollar a day" poverty line was first introduced in 1990 as a measure to meet such standards of living. For nations that do not use the US dollar as currency, "dollar a day" does not translate to living a day on the equivalent amount of local currency as determined by the exchange rate. Rather, it is determined by the purchasing power parity rate, which would look at how much local currency is needed to buy the same things that a dollar could buy in the United States. Usually, this would translate to having less local currency than if the exchange rate was used as the United States is a relatively more expensive country.

Global Wealth Distribution 2020 (Property)
Global share of wealth by wealth group —Credit Suisse, 2021
Global share of wealth by wealth group —Credit Suisse, 2017

From 1993 through 2005, the World Bank defined absolute poverty as $1.08 a day on such a purchasing power parity basis, after adjusting for inflation to the 1993 US dollar and in 2008, it was updated as $1.25 a day (equivalent to $1.00 a day in 1996 US prices) and in 2015, it was updated as living on less than US$1.90 per day, and moderate poverty as less than $2 or $5 a day. Similarly, 'ultra-poverty' is defined by a 2007 report issued by International Food Policy Research Institute as living on less than 54 cents per day. The poverty line threshold of $1.90 per day, as set by the World Bank, is controversial. Each nation has its own threshold for absolute poverty line; in the United States, for example, the absolute poverty line was US$15.15 per day in 2010 (US$22,000 per year for a family of four), while in India it was US$1.0 per day and in China the absolute poverty line was US$0.55 per day, each on PPP basis in 2010. These different poverty lines make data comparison between each nation's official reports qualitatively difficult. Some scholars argue that the World Bank method sets the bar too high, others argue it is too low.

There is disagreement among experts as to what would be considered a realistic poverty rate with one considering it "an inaccurately measured and arbitrary cut off". Some contend that a higher poverty line is needed, such as a minimum of $7.40 or even $10 to $15 a day. They argue that these levels would better reflect the cost of basic needs and normal life expectancy.

One estimate places the true scale of poverty much higher than the World Bank, with an estimated 4.3 billion people (59% of the world's population) living with less than $5 a day and unable to meet basic needs adequately. Philip Alston, a UN special rapporteur on extreme poverty and human rights, stated the World Bank's international poverty line of $1.90 a day is fundamentally flawed, and has allowed for "self congratulatory" triumphalism in the fight against extreme global poverty, which he asserts is "completely off track" and that nearly half of the global population, or 3.4 billion, lives on less than $5.50 a day, and this number has barely moved since 1990. Still others suggest that poverty line misleads as it measures everyone below the poverty line the same, when in reality someone living on $1.20 per day is in a different state of poverty than someone living on $0.20 per day.

Other measures of absolute poverty without using a certain dollar amount include the standard defined as receiving less than 80% of minimum caloric intake whilst spending more than 80% of income on food, sometimes called ultra-poverty.

Relative poverty

Economics Gini coefficient2
Graphical representation of the Gini coefficient, a common measure of inequality. The Gini coefficient is equal to the area marked A divided by the sum of the areas marked A and B, that is, Gini = A/(A + B).

Relative poverty views poverty as socially defined and dependent on social context. It is argued that the needs considered fundamental is not an objective measure and could change with the custom of society. For example, a person who cannot afford housing better than a small tent in an open field would be said to live in relative poverty if almost everyone else in that area lives in modern brick homes, but not if everyone else also lives in small tents in open fields (for example, in a nomadic tribe). Since richer nations would have lower levels of absolute poverty, relative poverty is considered the "most useful measure for ascertaining poverty rates in wealthy developed nations" and is the "most prominent and most-quoted of the EU social inclusion indicators".

Usually, relative poverty is measured as the percentage of the population with income less than some fixed proportion of median income. This is a calculation of the percentage of people whose family household income falls below the Poverty Line. The main poverty line used in the OECD and the European Union is based on "economic distance", a level of income set at 60% of the median household income. The United States federal government typically regulates this line to three times the cost of an adequate meal.

There are several other different income inequality metrics, for example, the Gini coefficient or the Theil Index.

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