What is Poverty?

Definition: Condition or state when there is a lack of certain basic goods or services. In general, it is a concept applied to people facing scarcity of indispensable goods and services.

What Does Poverty Mean in an Economy?

Poverty tends to be a relative term since the absence of a particular product can be seemed as basic within a group but unessential within another. An example might be a TV set at home. In some countries, not owning this good can be considered as signal of poverty, while in others it is seen as a little luxury.

Because of that, government and multilateral institutions commonly set standards to define poverty and monitor poverty trends. Data about poverty allows countries to develop strategies to improve population’s quality of living.

Moreover, within the general poverty concept there can be sub-concepts. For instance, in 1995 the United Nations defined “absolute poverty” as the neediness of minimum calorie intake and restricted access to essential services like drinking water, health, sanitation facilities, shelter, education and information. The World Bank demarcated the absolute poverty line at US$1.9 per day, which means that any person earning less than US$1.9 per day is considered to be in “absolute poverty”.


The new Social Affairs Secretary of a Latin American country was very concerned about alarming poverty rates published by a national newspaper. The editor took information from a global report delivered by the World Bank where the Latin American country’s poverty rate reached 32% people according to the US$1.9 earned-per-day benchmark.

The Secretary decided to develop its own research regarding poverty in the country but he defined the poverty line at a minimum earning of US$1 per day. After three months, the Secretary announced that only 20% of population was classified as “absolutely poor”, which was a significantly lower rate than the data previously published by the newspaper.

Additionally, the Secretary remained concerned and decided to implement a program that provides free food, health services and education to poor populations.