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What’s Poverty? Meaning, Causes, and How to Measure


Poverty refers to a state where an individual or a group doesn’t have the financial resources to meet their basic needs, including food, shelter, clothing, and healthcare. The primary causes of poverty can include lack of education, job loss, inequality, social discrimination, and natural disasters. This socio-economic issue is often measured by the poverty line, which is set at an income threshold below which an individual or family is officialy considered poor.


The phonetics of the keyword would be:What’s: /wɒts/Poverty: /ˈpɒvərti/Meaning: /ˈmiːnɪŋ/Causes: /ˈkɔːzɪz/And: /ænd/ or /ənd/How: /haʊ/To: /tuː/ or /tə/Measure: /ˈmɛʒər/It’s important to note that phonetics can vary slightly based on accents and regional dialects.

Key Takeaways

Main Takeaways about Poverty

  1. Understanding Poverty : Poverty is a social and economic condition characterized by a lack of basic necessities such as food, shelter, clean water, education, and healthcare. It can also refer to the inability to afford a decent standard of living, often compared to others in the same society. It’s a complex issue that impacts individuals and communities, leading to a cycle of poverty that can be difficult to break without outside intervention.
  2. Causes of Poverty : Poverty is caused by a variety of factors including but not limited to lack of education, unemployment, social inequality, and political instability. Natural disasters, disease, and war can also lead to poverty. In many cases, these factors interrelate in such a way that they exacerbate one another, contributing to a cycle of poverty. Economic systems and policies, both on a national and global scale, can also influence the poverty rates.
  3. Measuring Poverty : Measuring poverty can be challenging due to its complex nature. Conventionally, poverty is measured using income levels, with those earning under a certain threshold classified as ‘poor.’ However, this income-based approach may not capture all aspects of poverty. Therefore, other measures such as the Poverty Line or Multi-dimensional Poverty Index (MPI) are also used. The MPI for instance, includes several indicators spanning health, education, and standard of living sectors to provide a more comprehensive picture of poverty.


The term “Poverty” is an important concept in business and finance as it refers to the state of having insufficient material possessions or income for a person’s needs. Its understanding is vital because it’s a pervasive issue affecting numerous people globally. The causes of poverty may range from lack of education, poor infrastructure, to economic instability, among others. Measuring poverty is likewise crucial as it allows policy-makers, researchers, and stakeholders to accurately identify the extent and intensity of poverty, which, in turn, aids in shaping effective strategies to alleviate it. Thus, attention to and understanding of poverty’s meaning, causes, and measurement methods is not only key to economic and social development, but also crucial in promoting sustainable growth and establishing equitable societies.


Poverty, in financial and business terms, is a complex concept that’s commonly used to refer to a lack of sufficient income or resources to sustain a minimum level of healthy and safe living conditions. Its primary purpose is to provide a measure of economic disparity within a population, and it acts as a foundational metric in economic development policies, welfare programs, income redistribution strategies, and international aid considerations. It allows policymakers and social scientists to identify vulnerable populations and develop interventions aiming to improve their financial well-being. It further highlights the structural issues within economies and societies that lead to economic inequality.The causes of poverty can be diverse and are typically context-dependent. They may range from the macro level (like economic recessions, political instability, demographic changes) to the micro level (such as lack of education, skills, job opportunities or poor health). The measure of poverty is a crucial tool in addressing these causes as it serves to pinpoint problem areas and track progress towards poverty reduction goals. Various approaches are used for this purpose, including the income-based approach, which focuses on comparing individual or household income with a defined poverty line, and the multidimensional approach, which considers other aspects of well-being, such as education, health, and living conditions. These measures provide the data necessary for crucial decision-making in governmental and non-governmental organizations, guiding economic policies and strategies aimed at poverty alleviation.


The term “poverty” refers to a state or condition in which an individual or community lacks financial resources to meet a minimum standard of living. It is typically associated with a lack of basic human needs like food, clean water, healthcare, education, clothing, and shelter.Example 1- Poverty in Sub-Saharan Africa: The major cause of poverty in this region is primarily political instability, contributing to economic mismanagement, corruption, and a lack of infrastructure. Additionally, a large part of the population is dealing with HIV/AIDS, which leaves a significant number of children orphaned and in poverty.Example 2- Rural Poverty in India: Despite being one of the fastest-growing economies in the world, India still has a significant rural population living in abject poverty. The causes are multifaceted, including poor agricultural practices, lack of education, overpopulation, and the caste system, which inhibits social and economic mobility.Example 3- Poverty in the Inner Cities of the United States: Even in a developed country like the USA, poverty is a major issue in the rundown and crime-prone inner cities where it is mainly caused by lack of education, drug addiction, and single-parent households. Economic opportunities tend to be scarce in these areas due to a lack of investment and business development.Measuring Poverty: There are typically two ways to measure poverty: absolute poverty and relative poverty. 1. Absolute Poverty: This refers to a specific amount of money needed for basic survival needs (like $2 per day according to World Bank). If an individual or family is below this amount, they are considered to be in poverty.2. Relative Poverty: This measurement is based on the overall distribution of income in a society. If an individual or family earns substantially less than the average income of society, they are considered to be in poverty. For instance, in most developed countries, an income below 60% of the national median is considered as being in poverty. However, it’s also important to note that poverty isn’t solely about income but includes other factors such as lack of access to health care, education, and other essential services.

Frequently Asked Questions(FAQ)

What is the meaning of poverty?

Poverty is a socio-economic condition characterized by lack of basic needs such as food, clean water, health care, clothing, education, and shelter. It is typically associated with low income, insufficient resources, and limited access to opportunities.

What causes poverty?

Poverty can be caused by various factors, such as an economy’s structural issues, inequalities in income distribution, lack of education, lack of employment opportunities, or socio-political instability. It can also occur due to rapid population growth, environmental degradation, and conflicts.

How is poverty measured?

Poverty is usually measured using two primary metrics: absolute poverty and relative poverty. Absolute poverty refers to the absence of the necessities required for basic human survival, including food, clean water, education, healthcare, etc. The World Bank, for instance, defines absolute poverty as living on less than $1.90 per day. On the other hand, relative poverty examines the economic status of individuals or families in relation to the economic status of others in society.

How does poverty impact a business?

Poverty can impact businesses in a variety of ways, such as reducing the purchasing power of potential customers, causing resource scarcity, which can drive up costs, and if severe can lead to socio-political instability, potentially disrupting business operations.

What steps can be taken to reduce poverty?

Measures to reduce poverty often involve a broad and integrated approach, incorporating factors such as improving access to education and healthcare, creating job opportunities, establishing pro-poor growth strategies, social protection programs for the vulnerable groups, innovative financial solutions like micro-credit schemes and policies aimed at economic stimulation and income redistribution.

Can a society completely eradicate poverty?

While some societies have significantly reduced poverty rates, eradicating poverty completely remains a challenge due to its complex causes and effects. However, the United Nations’ Sustainable Development Goals (SDGs), particularly Goal 1, aims to end poverty in all its forms by 2030. This goal underscores the global commitment to achieving this objective.

How does poverty affect economic growth?

Poverty can negatively impact economic growth by limiting human capital development (through malnutrition, lack of education, etc.), reducing productivity, increasing crime and social unrest, and imposing higher costs on public health and social safety nets.

Related Finance Terms

  • Absolute Poverty: A condition characterized by severe deprivation of basic human needs. It refers to a certain level of income below which it is not possible to maintain an adequate standard of living.
  • Relative Poverty: Measures poverty in relation to the economic status of other members of the society, not in absolute terms.
  • Poverty Line: The minimum level of income deemed adequate in a particular country or region. It is used to categorize the financial condition of an individual or a family.
  • Poverty Rate: The ratio of the number of people who fall below the poverty line; it measures the prevalence of poverty in a country.
  • Poverty Reduction: Strategies or measures, such as economic growth, reduction of income inequality, and social protection, intended to reduce or eradicate poverty.

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