What Is Poverty?

Poverty is a state or condition in which a person or community lacks the financial resources and essentials for a minimum standard of living. Poverty means that the income level from employment is so low that basic human needs can't be met. Poverty-stricken people and families might go without proper housing, clean water, healthy food, and medical attention. Each nation may have its own threshold that determines how many of its people are living in poverty.

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Poverty

Understanding Poverty

Poverty status in the United States is assigned to people that do not meet a certain income threshold, which is set by the Department of Health and Human Services (HHS). Poverty rates in the United States—the percentage of U.S. population living in poverty—are calculated by the U.S. Bureau of Census.

According to the Census figures from 2016, more than 40 million people in the U.S. live below the poverty line. However, the measurement of poverty excludes the following people:

  • Institutionalized people
  • People living in military quarters
  • People living in college dormitories
  • Individuals under the age of fifteen

Key Takeaways

  • Poverty is a state or condition in which a person or community lacks the financial resources and essentials for a minimum standard of living.
  • Poverty-stricken people and families might go without proper housing, clean water, healthy food, and medical attention.
  • The U.S. poverty income threshold for a family of four with two children under the age of eighteen is $25,465 per year.

U.S. Poverty

Each year, the Census Bureau updates its poverty threshold statistics, and the table below shows the 2018 income thresholds for those in poverty. Each column represents the number of people living in a household that are under the age of eighteen.

  • The poverty income threshold for a family of four with two children under the age of eighteen is $25,465 per year (highlighted in red).
  • For two people over the age of 65 with no children under the age of eighteen, the poverty threshold comes in at $15,178 per year (highlighted in blue).
  • We can see that the income level for the poverty threshold increases for families with more children under the age of eighteen.
Poverty Thresholds 2018
Poverty Thresholds 2018.  Investopedia

The poverty thresholds, as well as the number of under-age children in a home, are important because they help determine how government aid can be allocated, such as food assistance and medical care. The measurement for those in poverty uses pretax income or income before taxes are taken out by the Internal Revenue Service (IRS).

Global Poverty

Poverty has decreased in developed countries since the industrial revolution. Increased production reduced the cost of goods, making them more affordable. Advancements in agriculture increased crop yields as well as food production. Since the mid-1990s, there are more than one billion fewer people in extreme poverty or less than $1.90 per day, according to the World Bank. However, over half of the world's population in extreme poverty live in the Sub-Saharan Africa region.

Common traits for those living in extreme poverty include:

  • Little or no education
  • Under the age of eighteen
  • Work in farming or agriculture

Poverty rates are important statistics to follow for global investors since high poverty rates are often indicative of more severe underlying problems within a country.

Consequences of Poverty

Access to good schools, healthcare, electricity, safe water, and other critical services remains elusive for many and is often determined by socioeconomic status, gender, ethnicity, and geography. For those able to move out of poverty, progress is often temporary. Economic shocks, food insecurity, and climate change threaten their gains and may force them back into poverty.

Poverty is a difficult cycle to break and 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 poverty is likely to cause increased tensions in society, as inequality increases. These issues often lead to rising crime rates in communities affected by poverty.

Poverty and Children

The impact that poverty has on children is substantial. Children who grow up in poverty typically suffer from severe and frequent health problems while infants born into poverty have an increased chance of low birth weight, which can lead to physical and mental disabilities. In some impoverished countries, poverty-stricken infants rarely live beyond one year. Those who live may have hearing and visions problems.

As a result, children in poverty tend to miss more school due to sickness and endure more stress at home. Homelessness is particularly hard on children since they often have little to no access to healthcare and lack proper nutrition—which often results in frequent health issues.

Battling Poverty

The United Nations and the World Bank are major advocates in reducing world poverty. The World Bank has an ambitious target of eradicating poverty by 2030. Some of the actionable plans to eliminate poverty include the following:

  • Installing wells that provide access to clean drinking water
  • Educating farmers on how to produce more food
  • Constructing shelter for the poor
  • Building schools to educate disadvantaged communities
  • Providing enhanced access to better health care services by building medical clinics and hospitals

For poverty to be eradicated as the World Bank has set out to do, communities, governments, and corporations would need to collaborate to implement strategies that improve living conditions for the world’s poor.