Differences Between Absolute, Relative, and Subjective Definitions of Poverty

Background of the study

Poverty is the lack of necessities like the basic food, shelter, medical care, and safety that are generally thought necessary to human (Bradshaw, 2006). Poverty is where people have unreasonably low living standards compared with others and experience hardship in everyday life (McClelland, 2000). The measurement for poverty is the “at risk of poverty line” that is derived from the net disposable household income which includes the income of all household members after taxes and social contributions, divided by the weighted factor of all household members, called “equivalent net disposable household income” (Buttler, 2013). Poverty line is the minimum acceptable standard of the welfare indicator that separates the poor from the non-poor (Albert and Collado, 2004). If household income falls below a specific income level then, the household is called poor (van Praag and Ferrer-i-Carbonell, 2005). But poverty still is a complex and multidimensional phenomenon (Santarelli, 2013). As Makoka and Kaplan (2005) stated that poverty is determined in different ways by different institutions and the indicators of poverty differ as well. Hagenaars and De vos (1998) divided the definition of poverty into three categories: absolute definitions, relative definitions and subjective definition.

Absolute poverty refers to subsistence below minimum, socially acceptable living conditions, usually established based on nutritional requirements and other essential goods; relative poverty compares the lowest segments of a population with upper segments, usually measured in income quintiles or deciles (Lok-Dessallien, 2000). And the subjective poverty which is defined by examining who people consider to be poor ( Eszter, 2011). Mor...

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...ition Marks (2005) on his Income Poverty, Subjective Poverty and Financial Stress for Department of Family and Community Services that subjective poverty is a perspective approach on how the people view themselves. World Bank institute (2005) is based on asking people of what minimum income level is needed most in order to just make ends meet.

Conceptual Framework

The conceptual framework is presented in figure 1. The main variables are subjective poverty and contingent financing. These have indicators which are Size of the family According to Orbeta (2006) in his study Empirical Overview of the Relationships of Family Size, Poverty and Vulnerability to Poverty shows there is a clear indication that poverty worsen as one moves from smaller to bigger family size households or poverty rises as family size increases, indeed larger family size reduces household savings