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What is 'Poverty'

Poverty is a state or condition in which a person or community lacks the financial resources and essentials to enjoy a minimum standard of life and well-being that's considered acceptable in society. Poverty status in the United States is assigned to people that do not meet a certain threshold level set by the Department of Health and Human Services.

Poverty rates in the United States, the percentage of U.S. population with poverty status, are calculated by the U.S. Bureau of Census, and precludes institutionalized people, people living in military quarters, those living in college dormitories and individuals under the age of 15. Poverty rates are an important statistic to follow as a global investor, as a high poverty rate is often indicative of larger scale issues within the country in question.

BREAKING DOWN 'Poverty'

Poverty has decreased in developed countries after the industrial revolution. Increased production has reduced the cost of goods, making them more readily available to members of society. Advancements in agriculture have increased crop yields, helping to provide adequate food production for the world. 95% of global poverty has been concentrated in East Asia, South Asia and Sub-Saharan Africa since the mid-1990s.

The United Nations and the World Bank are major advocates in reducing the world’s poverty. The World Bank estimates that approximately 702 million people were living in extreme poverty in 2015, this compares to 1.75 billion people in 1990. As of 2016, it is estimated that less than 10% of the world’s population live in extreme poverty. In the United States, it is estimated that approximately 15% of the population live in poverty.

The World Bank defines the poverty line as $1.90 a day.

Consequences of Poverty

Poverty is a difficult cycle to break, often passed from one generation to the next. Typical consequences of poverty include alcohol and substance abuse; less access to education; poor housing and living conditions and increased levels of disease. Heightened levels of poverty are likely to cause increased tensions in society as inequalities are realized. These issues often heighten crime rates in communities affected by poverty.

Working Toward Eradicating Poverty

The World Bank has an ambitious target of eradicating poverty by 2030. For this to be achieved, communities must work together to implement strategies that improve living conditions of the world’s poor. Consideration needs to be given to ideas such as installing wells that provide access to clean drinking water; educating farmers how to produce more food; constructing shelter for the poor; building schools to educate disadvantaged communities and providing enhanced access to better health care services by building medical clinics and hospitals.

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