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What Is Poverty?

The question of defining poverty hinges on the question, "Who is actually poor?" It would be convenient if we all identified poverty in the same way. We can look at certain extreme examples and easily agree that some particular people are poor. But the difficulty is in drawing the line between those who are poor and those who are not.

This question is not just an intellectual exercise or argument about social classes. It matters greatly how we decide who is poor, especially when we want to help alleviate poverty. After all, every dollar that a government spends on those who do not need it could have gone to those who really do need it.

In general, there are three basic ways in which poverty is currently defined:

1. The relative definition.
2. The bureaucratic definition.
3. The functional definition.

These ways each have their elements of subjectivity, so even if we agree on a basic approach to defining poverty we may not easily agree on the definition. But the differences in approach are important in any case, so let's look at them one at a time.

Relative Poverty

It is likely that if someday we are all wealthy by today's standards, we will still refer to some people in society as poor. This is because the most common way we define poverty is by comparison. Those who - compared to the majority of people around them - have less wealth and make less money - are called poor. The relativeness of this approach to defining poverty can be seen easily if we take a historical perspective.

Consider the kings of past centuries, who despite all their wealth had no flush toilets, proper medical care, or even the ability to heat their castles sufficiently for comfort in the winter. Then think about a modern family in the United States that is called poor despite having all these things the king lacked, along with large televisions and other things past kings could not even imagine. Poverty, as a concept, obviously develops over time, and often refers simply to those who make the least in a society, regardless of their actual circumstances.

In some respects this is inevitable, and we can't entirely discard this relative defining of poverty. It will influence the other definitions, as we shall see, and this is appropriate to some extent. It is easy to imagine that there is a level of income beyond which more adds nothing to a person's well-being, but if there is, it is far beyond our common ideas about this, and not likely to ever be achieved by everyone. Having more televisions and other things may not improve life, but it can be argued that there is endless improvement available in some areas, and so people will always be "left behind" in some sense, and so subject to this definition of poverty.

For example, there can be better and better medical care. This suggests that someday when what is the best medical care known today is surpassed by something better, and some people can't afford the new higher level of care, they will be considered poor on this basis. That's true even if they are considered middle class today at the same income level. The same might be said of education. At some point, when most people have virtually unlimited educational opportunities, it may then be a sign of poverty if a person can't afford to spend the first thirty years of life in various schools and universities.

We might argue about the second example, since it is more difficult to prove that more education really does improve life in every case. But to spell out the significance of the first example, imagine that a new treatment can cure every single type of cancer, but costs thirty million dollars. Add to that the assumption that this happens in a wealthy future when almost everyone can afford the costs of that treatment. Now who wouldn't think it a shame if a few people had to die because the treatment just cost too much. We can easily imagine thinking of that as poverty.

Though there may be an appropriate use of relative poverty as a concept, for the reason given above, for the most part it isn't all that useful to think of poverty in this way. If we consider people in our societies poor only because they are making less than most of us, we will tend to forget that there are other in the world who are actually dying from poverty on a daily basis. Some of us would argue that it's better to use our tax dollars to save a truly poor child in the Appalachian mountains from nutritional deficiencies, or even to save a foreign life than to upgrade the possessions or lifestyle of those who have the essentials of life and are poor only by comparison to the wealthy or middle class.

Bureaucratic Poverty

For the sake of welfare programs, foreign aid, and other government measures to help the poor, there needs to be a clear definition of poverty. For those who deal with poverty around the world, it is common to use standards like "a dollar or less per day per person" as a measure of extreme poverty, and two dollars as the cut-off for poverty in general. The United States government defines poverty for a family of four (as of 2010) in the lower forty-eight states as under $22,000 per year, or about $15 per day per person.

This kind of definition by numbers is convenient. It also hides a lot of truth about the actual situations of each family or individual. Some are suffering when making only $22,000 per year, while others are doing just fine making far less. When my wife and I first married, we made less that half of the poverty level, but required no help. Why? Because we lived in a home in which the mortgage was paid off and had few other expenses. We didn't like being that "poor," but we had the essentials of life, and even enough to travel the country looking for a better place to live.

It might seem that there has to be a simple definition by the numbers in order to efficiently run various programs designed to combat poverty. After all, how else would we choose who gets help? But there is a better way, which we'll look at next.

Functional Poverty

In his book, Creating a World Without Poverty, Muhammad Yunus suggests that we need to clearly define poverty and the measures that will indicate it has been overcome. He also thinks these should be different for each area of the world, depending on many factors. In other words, the question "What is poverty?" has a different answer in each country, or even each area of a country.

He proposes that the defining measurements and associated goals should be based on specific living conditions more than just income level. Here is the list of ten signs that his Grameen Bank looks for to determine that a family is out of poverty.

"1. The bank member and her family live in a tin-roofed house or a house worth at least 25,000 taka (roughly equivalent to $370). The family members sleep on cots or a bedstead rather than on the floor.

2. The member and her family drink pure water from tube wells, boiled water, or arsenic-free water purified by the use of alum, purifying tablets, or pitcher filters.

3. All of the member's children who are physically and mentally fit and above the age of six either attend or have finished primary school.

4. The members minimum weekly loan repayment installment is 200 taka (around $3).

5. All family members use a hygienic and sanitary latrine.

6. All family members have sufficient clothing to meet daily needs, including winter clothes, blankets, and mosquito netting.

7. The family has additional sources of income, such as a vegetable garden or fruit-bearing trees, to fall back on in times of need.

8. The member maintains an average annual balance of 5,000 taka (around $75) in her savings account.

9. The member has the ability to feed her family three square meals a day throughout the year.

10. All family members are conscious about their health, can take immediate action for proper treatment, and can pay medical expenses in the event of an illness."

This is what I call a functional definition of poverty. It makes perfect sense that poverty is something different in different parts of the world, and this is not just a matter of relativity, although that plays a role. To give a simple example, it can be a sign of poverty to have no heating system in your home if you live in northern Minnesota, but this is almost meaningless in many warmer places with climates.

This also allows for more creativity in addressing poverty, and ultimately more efficiency. For example, if one family has the space and inclination to grow a large garden, they might meet a proportion of their food needs in this way, and so need less financial help - which means that money can go where it is more needed. In fact, the poor in rural areas who lack sufficient employment and so have time, might be helped to grow gardens as a cheaper means of providing food than simply giving them the money to go to the grocery store.

In the United States, we might normally help the poor with medical care by paying existing providers, but if we look at this not as an income problem, but as a question of the care itself, we may find better alternatives. For example, if poverty - or at least this aspect of it - is concentrated in an area, it might cost less to build a government-funded clinic than to pay existing providers for all the care needed in that area.

Also, when we look at the situation as not just a matter of low income, but of the actual conditions we think this leads to, we can address some of the root causes of poverty more effectively. For example, some people are poor in part because they struggle with transportation issues. They may lose jobs or at least some work income whenever large unexpected car repairs prevent them from getting to work. They must spend a large part of their income owning and operating a car to get to and from work. A bus system that is perhaps free to those who choose not to own a car might be cheaper than the welfare checks that are otherwise necessary or larger than they need to be.

A functional approach to looking at poverty also allows us to address causes that are based on behavior. Some people may feel uncomfortable discussing this, but it is evident that poverty can be in part because of the choices made by some poor people. For example, suppose we use only the "definition by the numbers" or bureaucratic approach to poverty, and find that the children in a given family are not getting proper nutrition. Seeing that this family falls below some arbitrarily-chosen income level, we assume this is cause of the children's lack of proper food. But what if we look closer at what is actually happening in the household? We may discover that the more important problem is poor financial planning.

For example, years ago a poor friend was paying $25 per week for a set of bunk beds and a dresser for her children, and would be paying that for many months to come, perhaps spending $500 in total. I bought her a nicer set used for $25 total and had her return the other set. She just hadn't thought carefully about the true cost of the rent-to-own furniture nor about the availability of high-quality items at thrift stores. Rent-to-own anything is about the most expensive way for the poor to furnish a home, and there are almost always better alternatives.

Applied to the situation of the under-nourished children described previously, $25 weekly would easily resolve any nutritional deficiencies. Bad financial habits are found in families throughout all levels of income, but the poor are the ones who would benefit most from learning how to better handle what little income and resources they have. Education, then, can be far more efficient in cases like these than just continuing to pay to cover the cost of mistakes or ignorance.

When we look at and define poverty from a functional perspective, we ask questions about more than just income levels. In looking at the housing the poor have, we might look beyond just the cost and the presumed income needed to afford that. We might ask, for example:

Why do the poor in some areas have such substandard housing?

What is substandard or dangerously deficient housing?

What causes have contributed to that situation?

Why is housing better and cheaper in some places?

What can be done to correct the problems or introduce new options?

We might investigate these issues and find that high property taxes are a primary reason for high rents. Regulations requiring a minimum amount of square footage keeps smaller cheaper homes out of some areas as well. Some landlords may be hesitating to improve old houses because of the permits and fees required as well - and all those costs would have to be passed on the the renters in any case. We can see from these examples that there may be ways to alleviate poverty without handing out checks. If the poor can pay $100 less for rent each month because of changes made in laws and regulations, they are effectively $100 richer in monthly income.

In the United States, using this functional defining of poverty, we might say that a person or family is poor if they regularly lack any of the following:

Clean water for drinking, hygiene and washing.
Sufficient clothing appropriate to the environment.
Sufficient amount of healthy foods.
Sanitary bathroom facilities.
Shelter that allows a healthy environment.
Access to suitable transportation for employment and basic needs.
Education through high school.
Basic health care.
Sufficient income to save for unexpected expenses.

I once knew a man who lived in a house without electricity or running water. He chose to live this way. He had a hand-pumped well which provided clean water for all his needs. He had a large garden and goats for milk, and enough occasional income so he never lacked sufficient food. He kept clean and had a bathroom apart from the house. His car was rarely used, but was available when he needed it. He could get health care when he needed it through various clinics and programs. He had a coffee can with cash in it for emergencies, and collected antiques that could be sold if he needed more cash.

This man's total income in some years was less than a seven hundred dollars, which certainly fit the government definition of poor in the United States, where he lived. In fact, even by standards of poorer countries in the world, he was living in poverty. But he had all the necessities of life, and this is an important point, especially in this case, as I will explain.

This man was perfectly capable of working for a living, but for years he did nothing more than the occasional odd job. That wouldn't necessarily have been a problem, given his limited needs. His house was hand-built and property taxes were less than $100 per year. He grew much of his food and didn't seem to care how old his clothes were. He had a winter coat and unlimited heat in the form of firewood that he cut from the surrounding woods.

At some point, though, he discovered how to get food stamps and other welfare benefits. He certainly qualified according to the formulas and definitions of the bureaucracies. The money and even the food stamps - which he sold to get more money - were used to feed his habits, which included marijuana, tobacco and alcohol. The money that went to this man - who didn't need it and chose to live the way he did in any case - could have been used to help someone who really needed it.

Not only was that money not used in better ways, but it encouraged bad habits in its recipient while discouraging his seeking employment. He did eventually get tired of the lifestyle and started working at a relatively high-paying job for which he had been qualified for years. Without the "help" of government he would have almost certainly become a tax-paying worker sooner.

That is an example of what can happen when we try to over-simplify our understanding of poverty with easy definitions. Poverty is not a function of assets or income alone, nor are the problems of the poor easily solved by money, because no country has an unlimited supply of wealth and income. We need to look at what constitutes real need and what causes contribute to it - and then work from that understanding - if we want to end poverty.


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What Is Poverty?

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