Difference Between Poverty and Inequality

Poverty and Inequality

Poverty is the state in which an individual or group can not meet basic human needs to maintain a minimum level of quality of life. The lack of income, employment, education, access to health or decent housing are some of the characteristics of this condition.

On the other hand, inequality refers to the unfair or unequal distribution of resources among various people or groups, caused by social, gender, ethnic, religious or other discrimination.

In this way, when we speak specifically of poverty, we speak of the lack of some resource, generally economic, to maintain a dignified living condition. In the case of inequality, this refers to the way in which resources are distributed.

Both situations are complementary, but they do not necessarily present themselves at the same level. There can be a lot of inequality in a society without there being a lot of poverty and vice versa.

What are the differences between Poverty and Inequality?

What is Poverty?

Poverty refers to a state in which a person or group of people can not meet basic needs that maintain a viable level of socio – economic life. In conditions of poverty, people are unable to participate in social life and make social contributions.

In this way, poverty promotes a vicious cycle. The lack of employment, education , as well as conditions that allow the socioeconomic development of the individual and the community, limit the possibilities of people to leave this state.

According to the United Nations, a person is in a state of poverty when he does not have access to means that guarantee the satisfaction of certain basic needs.

Lack of resources, discrimination and various forms of inequality, infrastructure problems, wars and conflicts are some of the most common causes of poverty in different regions.

In general, when we talk about poverty in a country, compared to other countries, or an individual compared to their fellow citizens, we talk about poverty in socio-economic terms. In other words, poverty in this sense is focused on those populations that are in the lowest social stratum.

Characteristics of Poverty

• It expresses the lack of something that is necessary.
• In conditions of poverty there is a vicious cycle.
• Limited or nonexistent basic services.
• There are nutrition problems.
• Low schooling.
• It carries health problems (including a short life expectancy).
• It generates social violence, isolation and discrimination.

Causes of Poverty

• Socioeconomic, gender, ethnic inequality, etc.
• Difficulty of access to basic resources such as food, drinking water, housing and health.
• Educational problems.
• Corruption.
• Wars and armed conflicts.
• Colonialism and slavery.
• Lack of employment.
• Infrastructure problems (regional and national).
• Scarcity of material resources (for example, agricultural and natural).

Types of Poverty

Poverty can be objective when previously agreed indicators are used, and according to which an individual or population is classified as being or not living in poverty. Also, this type of poverty is divided into absolute and relative.

When it comes to subjective poverty , it refers to the perception that people have of their condition, even when they have the minimum income necessary to not be considered objectively poor. That is, if a person feels poor because he cannot satisfy needs that he considers important.

• Absolute Poverty

The absolute poverty is a condition in which the income is not enough to meet basic living needs. For example, food, drinking water, hygiene spaces, health, housing, education and information.

Absolute poverty is used to compare poverty between different countries with different socioeconomic conditions. This way of measuring poverty has the advantage of offering objective data that goes beyond the borders of a country.

For example, a salary of $1,800 per month in New York or London is possibly considered a low salary. On the other hand, in Mexico City, that same amount of money would be above the monthly minimum wage.

However, if a family in London lacks decent housing, food and basic services, and the same occurs with a family in Mexico City, it can be said that both are in a condition of poverty. This regardless of the income they have in either city.

This is why it is better to use access to specific basic needs as a measure to compare poverty levels between different countries. If a person is in a situation of absolute poverty, this person is poor regardless of their origin.

• Relative Poverty

Relative poverty refers to income that lies below the average national income in a specific country. In this case, the aim is to identify that population within a country that is below the average for that country in income.

A characteristic of this type of poverty is that it changes according to the level of average income within a given country over time. In other words, relative poverty within the same country is variable. For example, the median salary of a person two decades ago is different from the median salary today.

Thus, relative poverty in one country is not the same as relative poverty in another. The goal is to identify people who are disadvantaged when compared to the population of their own country.

If a person’s salary is the equivalent of $900 per month in England, it is possible that their economic situation is different from that of a person who has the same salary in India, Nigeria, South Africa or Costa Rica.

• International Poverty Line

The international poverty line is an indicator developed by the World Bank used to compare the level of poverty, or access to a minimum standard of living, between different countries. This is one of the best known poverty lines.

This poverty line measures the minimum necessary consumption that allows access to the minimum required in terms of food and shelter, among other elements.

Originally, the poverty line set the minimum daily income of $1 as the limit below which an individual was in a state of extreme poverty. Currently, this figure stands at $1.90 per day.

The use Parity Purchasing Power (PPP) as a basis for establishing a minimum income limit internationally. The PPP establishes that the exchange rate between two currencies should allow the purchase of the same good or service at the same price in two different countries.

In other words, the PPP proposes that the same good, such as a personal computer, should cost the same in two different countries. For example, if a personal computer costs the equivalent of $300 in Argentina, this same computer should cost the same $300 in Mexico (converted to Mexican pesos).

Using the minimum income of USD1.90 implies that this poverty line focuses more on the analysis of less developed countries. Other lines have been established for lower-middle-income countries ($3.20) and upper-middle-income countries ($5.50).

According to the World Bank, 10% of the world’s population lives on $1.90 or less a day. 26% with less than $3.20 per day, and 46% with less than $5.50 per day.

• Subjective Poverty

The subjective poverty refers to the perception that people have to the assess their own socio-economic status. This focuses on the vision that people have about their condition.

A person can have the minimum needs that the poverty line establishes, as well as the minimum income, and still feel that they are in a state of poverty.

Surveys are carried out to measure subjective poverty, using indicators such as the Subjective Poverty Line (SPL). This uses the minimum family income as a reference and people’s perception of whether this income is sufficient to satisfy their basic needs.

Other indicators focus on the minimum income, examining the income and expenses of an individual or family. Here, the minimum amount that people consider is necessary to meet their basic expenses is considered.

Among the problems involved in measuring subjective poverty are the fact that information is collected through surveys, and people’s responses are not always reliable. Likewise, the sample size of respondents can be limited, and coding the results takes time.

What is Inequality?

The inequality refers to an imbalance or uneven distribution of a resource between two or more agents.

When there is inequality, there is a difference between what someone owns or what they have access to, compared to what another person owns or has access to. Likewise, inequality can span the entire social spectrum and not just populations with the lowest economic level.

Inequality covers several interrelated aspects, which can be economic, social, gender, educational, religious, etc.

Inequality shares with poverty the fact that it can sustain or promote a vicious cycle. It is very difficult to get out of a situation where resources are unevenly distributed.

Characteristics of Inequality

• Resources or income are unevenly distributed.
• Be part of and promote a vicious cycle.
• There is social, gender, ethnic discrimination, etc.
• One person or group has little access to opportunities.
• Limits participation in the social and political life of a group.

Causes of Inequality

• Unequal distribution of the wealth of a country.
• Political and social problems.
• Wars and armed conflicts.
• Being in a state of inequality favors its perpetuity.
• Lack of access to education.
• Discrimination based on gender, religion, ethnic origin, sexual preference, etc.

Types of Inequality

Inequality can present itself in different ways. In some cases it can be economic, due to an unfair distribution of income in a population. At other times it may be gender, if a person’s treatment and opportunities are valued by their gender.

In any case, the different forms that inequality takes are interrelated. It is common for there to be gender inequality and employment or economic inequality in the same situation.

• Social Inequality

The social inequality manifests itself when a group or groups of persons are treated differently, or have the right or access to different social conditions, because of their gender, sociocultural origin, religion, among others.

This type of inequality is expressed through discrimination in areas such as political or citizen participation (civic rights), access to health and social security, decent housing, education, etc. Such discrimination may be based on prejudice, stereotypes, or racism.

When there is large-scale social inequality in a country, the affected population or populations remain in a situation that hinders their ability to get out of spaces of marginalization and discrimination.

• Economic Inequality

The economic inequality refers to the difference in the distribution of income in a population. There is economic inequality in a country or region, when one part of the population has limited access to the wealth generated, while another part has the majority of this wealth to its credit.

Some indicators of economic inequality are wealth, income and consumption, performance and / or opportunity (such as investment or employment). In other words, a person or population does not have equal access to these elements, in relation to other people or populations, given the same conditions of participation.

To measure economic inequality, one of the most used measures is the Gini coefficient, named after its creator, the Italian statesman and sociologist, Corrado Gini (1884-1965).

The Gini coefficient works by measuring the income of the population of a country, according to a scale of values ​​that goes from 0 to 1, with 0 being equivalent to an equitable distribution, while 1 represents a totally unequal distribution. However, no country reaches these extremes.

Another way to measure this inequality is the Palma index, named after the Chilean economist José Gabriel Palma (1947-). This index divides the gross national income of 10% of the population (the richest) by that of 40% of the population (the poorest).

In this, the important thing is to compare the disparity that exists between the income that the richest population obtains in a country, with respect to the poorest population.

Another indicator used is the Theil index, which is the coefficient between the income ratios of different groups.

• Gender Inequality

The gender inequality is based on having a group limited to access rights and opportunities in social, cultural, economic or otherwise, based on gender or sex.

This type of inequality covers various areas of people’s lives, from their personal and family relationships to their social life.

Even if gender inequality is not exclusive to one gender, this inequality has historically affected the vast majority of women, caused mainly by sexist practices.

The Gender Inequality Index (GDI) was introduced by the United Nations in 2010, within the United Nations Development Program (UNDP). The GDI measures three dimensions of human development: empowerment, reproductive health, and the labor market.

In reproductive health, the GDI focuses on indicators such as maternal mortality and adolescent pregnancy / births. In empowerment, it focuses on indicators such as participation by gender in parliamentary positions and educational level. Finally, in the case of the labor market, the GDI uses indicators of participation in the labor market for men and women.

Some ways in which gender inequality manifests itself are:

• Income / salary inequality and access to certain professions.
• Sexual, domestic and physical violence.
• Inequality in access to education (and in its exercise at a higher level).
• Inequality in family domestic work.
• Inequality in access to public positions.

Types of Inequality

• Legal or legal inequality: occurs when a person or group has privileges before the law, while others do not have access to these privileges.
• Ethnic or racial inequality: it is the discrimination of a person or group based on their ethnic origin, or on their physical attributes (such as skin color).
• Religious inequality: it occurs when practitioners of a religion or creed are discriminated against or do not have the same privileges in education, health, politics, etc.
• Educational inequality: occurs when a group suffers from discrimination in access to education, professionalization and information.