Tuesday 2 March 2010

The Portuguese Dream II

   One of the comments motivates this post.
   The concepts of absolute and relative poverty do differ. The former defines the poverty line by exactly computing the amount one needs to afford a basic consumption basket. The latter defines poverty in relation to a country's living standards. Both have advantages and drawbacks. Absolute poverty relies on a more paternalistic viewpoint, and it is also much more difficult to compute. In particular, one would ideally want geographically differentiated poverty lines, for prices are not the same in all the regions of a country. Relative poverty is the applied concept in most countries, notably in the EU, no doubt due its relatively easy applicability. Lacking any operational way to compute measures of absolute poverty, we must rely on the relative one.
   Let me add some more data. A study from the Portuguese National Institute of Statistics using 2007 data places the poverty line at 406 euro a month, per (equivalent) adult. While one may question whether this income corresponds to the exact cost of the basic consumption basket that buys a person a decent life, it remains a fact that this threshold corresponds to very low living standards. The poverty rate amongst families with dependent children with adults having worked more than six months is then 24%.


  1. Dear Susana,
    Thank you for your clarification. It is very important to think in terms of absolute or "strict poverty" and relative poverty. In Germany (2004) 16% of the population were relatively poor, compared to only 1,9% living in strict poverty.
    Finally, you provide a figure of 406,00€ /month for the poverty line. Does that include social transfers? It makes a huge difference.

  2. That's a good point indeed. It does include social transfers and it is net of taxes. In other words, this is as close as you get to a measure of "pocket money".