Essay: Relative poverty line

Sample Essay

According to Economists the relative poverty line is generally set at 50 to 60 percent of a country’s median household income. Rainwater and Smeeding (2003) report survey evidence for the U.S. that suggests the socially perceived relative poverty line has been 45 to 50 percent of median income. The specific percentage obviously affects the measured level of relative poverty, but has little effect on the trend.

A sensible approach to establishing a relative measure would set the poverty threshold at a designated percentage of median “equivalent income,” which adjusts incomes for household size (Singh, 2005). Income should be defined broadly along the lines of the Census Bureau’s income definition 15 (U.S. Census Bureau, 2009b). The relative poor would then include all persons in households with equivalent income less than or equal to the relative threshold.

It has fundamentally been agreed that relative poverty is most salient for public policy. This implies that one should assess the success of antipoverty policy with regard to its effect on relative poverty, a substantially higher bar than its effect on absolute poverty. In the long run it is the only measure of poverty that makes sense. No one today would accept the poverty line proposed by Robert Hunter as a credible indicator of economic need in 2009. Assuming gradual increases in real income, no one fifty years from now will find today’s official poverty line credible, either.

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