Relative measures of poverty

Another way of looking at poverty is in relative terms. "Relative poverty" can be defined as having significantly less access to income and wealth than other members of society. Therefore, the relative poverty rate can directly be linked to income inequality. When the standard of living among those in more financially advantageous positions rises while that of those considered poor stagnates, the relative poverty rate will reflect such growing income inequality and increase.


Conversely, the poverty rate can decrease, with low income people coming to have less wealth and income if wealthier people's wealth is reduced by a larger percentage than theirs. In 1959, a family at the poverty line had an income that was 42.64% of the median income. Thus, a poor family in 1999 had relatively less income and therefore relatively less purchasing power than wealthier members of society in 1959, and, therefore, "poverty" had increased. But, because this is a relative measure, this is not saying that a family in 1999 with the same amount of wealth and income as a family from 1959 had less purchasing power than the 1959 family.


In the EU, "relative poverty" is defined as an income below 60% of the national median equalized disposable income after social transfers for a comparable household. In Germany, for example, the official relative poverty line for a single adult person in 2003 was 938 euros per month (11,256 euros/year, $12,382 PPP. West Germany 974 euros/month, 11,688 euros/year, $12,857 PPP). For a family of four with two children below 14 years the poverty line was 1969.8 euros per month ($2,167 PPP) or 23,640 euros ($26,004 PPP) per year.


According to Eurostat the percentage of people in Germany living at risk of poverty (relative poverty) in 2004 was 16% (official national rate 13.5% in 2003). Additional definitions for poverty in Germany are "poverty" (50% median) and "strict poverty" (40% median, national rate 1.9% in 2003). Generally the percentage for "relative poverty" is much higher than the quota for "strict poverty". The U.S concept is best comparable to "strict poverty". By European standards the official (relative) poverty rate in the United States would be significantly higher than it is by the U.S. measure. A research paper from the OECD calculates the relative poverty rate for the United States at 16% for 50% median of disposable income and nearly 24% for 60% of median disposable income (OECD average: 11% for 50% median, 16% for 60% median).