Absolute Poverty
What is Absolute Poverty?
Absolute poverty is being below a fixed threshold of income or consumption set by the cost of basic needs, regardless of what everyone else has.
The threshold is anchored to a bundle of goods, food, shelter, clothing and basic health care, rather than to the incomes of neighbors. Because it is fixed in real terms, it does not shift when average incomes rise, so broad economic growth mechanically pulls people over the line and the absolute poverty rate falls. That is why absolute poverty can in principle reach zero in a country, while relative poverty cannot be removed by growth alone. Rich countries mostly report relative measures because almost nobody there sits below a basic-needs threshold, and the international extreme-poverty line is aimed at the world's poorest economies. The count always depends on where the fixed threshold was drawn.
Absolute Poverty: a worked example
Suppose a country's absolute line is consumption worth 900 units a year. A farmer consumes 700 units, so she is counted poor. Irrigation reaches her village and her consumption rises by half, to 1,050 units, which puts her above the line even though she is still the poorest person there. Run that across a whole economy and you get the pattern seen in East and South Asia through several decades of fast growth: the share of people under a fixed international line fell sharply while inequality inside those countries did not fall with it.
The mistake students make with absolute poverty
A common belief is that any poor person in a rich country is in absolute poverty. Absolute poverty means falling short of a fixed basic-needs standard, and by that standard it is rare in high-income countries, which is why they report relative poverty instead. The reverse error is treating the absolute line as scientific and exact. It is a chosen threshold, and shifting it by a small amount changes the headcount substantially.
Absolute Poverty questions
What is the difference between absolute and relative poverty?
Absolute poverty is measured against a fixed basic-needs threshold, while relative poverty is measured against the income distribution of the country you live in. If every income in a country doubled, absolute poverty would fall but relative poverty would barely move. The first asks whether you can meet basic needs; the second asks how far behind your society you are.
Can absolute poverty ever reach zero?
Yes, absolute poverty can in principle fall to zero, because the threshold is fixed rather than tied to average incomes. If growth and redistribution lift everyone's consumption above the basic-needs line, nobody is counted absolutely poor. Relative poverty cannot be removed the same way, since its line rises whenever median income rises.
Why do rich countries rarely report absolute poverty?
Rich countries rarely use absolute measures because almost no one there falls below a basic-needs threshold designed for the poorest economies. A line built around minimum calories and shelter would report a rate near zero and tell policymakers nothing useful. Relative measures capture exclusion from a normal standard of living in that society instead.
Formula / Example
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