Understanding the Difference between a Living Income and the Poverty Line
Today, the topics of living income and the poverty line have attracted the attention of significant people in academia, development organizations and politics. The desire for governments and their development partners to establish a credible instrument to evaluate poverty has sparked attention, with the goal of ending poverty by 2030 to meet Sustainable Development Goal 1. Additionally, attention has grown as a result of criticism of the poverty line’s limitations in assessing poverty, despite the fact that it is still widely used.
As a result, the purpose of this paper is to examine the differences between the living income and poverty line concepts in order to better comprehend them.
The Poverty Line and the Living Income Concepts: What is the Difference?
Charles Booth, who originally coined the term “line of poverty” to divide the people of London into those in poverty and those in comfort in the 1880s, is credited with coining the “poverty line concept.”. According to Booth’s “line of poverty” concept, poor people were individuals with a fairly consistent, but modest income, such as 18S. to 21S. per week for a modest family, and those who fall below this criterion were referred to as “very poor.” On the other side, Himmelfarb attributes the origin of the poverty line concept to Rowntree, whereas Simey claims that Rowntree got that concept from Booth who first used the concept “line of poverty.”
The poverty line is the minimum level of income considered adequate in a given country. Furthermore, it is classified into two categories: absolute poverty, which is defined as a situation of deprivation of basic needs and services necessary for maintaining subsistence regardless of a society’s level of well-being, and relative poverty, which is defined in relation to inequality and average living standards in a society. Often, the poverty line is determined by adding up the total cost of all basic needs consumed by an average human adult in one year. Thus, one may claim that the poverty line concept is concerned with the population’s subsistence and survival.
The concept of the “poverty line” has been widely embraced by governments, non-governmental organizations and scholars throughout the globe to identify those who are below the poverty line, in order to establish development initiatives to help them. For instance, in 2011, World Bank set poverty at $1.90 per day to evaluate the country’s poverty.
However, the poverty line concept is losing acceptance in the development arena, with critics accusing it of overlooking the family’s thrive in favor of subsistence living. According to Hagenaars, a family’s income above the poverty line does not always imply a decent level of living. As a result, the concept of a living income is gaining support, particularly in developing nations where farmers’ incomes need to be increased to achieve a decent standard of living.
A living income, according to the Living Income Community of Practice, is the net annual income required for a family in a specific location to afford a decent standard of living for all family members, including decent food, decent housing, water, health care, education and other essential needs, as well as the cost of unexpected events. The widely accepted method for measuring living income is the Anker Methodology by Richard and Martha Anker. The Anker Methodology accounts for the cost of a decent living plus the margin of unforeseen events; moreover, the local context price is taken into consideration, bearing in mind that prices vary between countries, and within a country (rural and urban areas may have different prices; per Grillo’s “From Living Wage to Living Income. Considerations for the use of the Anker methodology for calculating living wages to inform living income estimates”).
To sum up, the above-discussed poverty line and living income concepts have shown important features of differences. Poverty line concepts emphasize the cost of the family’s subsistence living, which accounts only for basic needs. But, living income focuses on the cost of a decent standard living for every member of the family, accounting for the cost of decent housing, decent food essential needs such as clothes, health care, water, etc., and provides the margin for unforeseen events.