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Poverty line

The poverty line is the level of income below which one cannot afford to purchase all the resources one requires to live. People who have an income below the poverty line have no discretionary disposable income, by definition.

The actual monetary value of the poverty line differs from place to place but is usually near some fixed value within a country. This occurs because the resources needed for living have different prices in different places. Even within a country, the poverty line can be markedly different between cities and farming towns, between areas of cold and warm climate, and so forth.

As almost all societies have some of their citizens living in poverty, the poverty line is useful as an economic tool by which to measure such people and consider socioeconomic reforms such as welfare and unemployment insurance to reduce poverty. It is not in a society's interest to have a large percentage of its citizens living below the poverty line as they have no disposable income and thus adversely affect economic growth. A baseline goal for a progressive government is to have all of its constituents possess an income level at least that of the poverty line.

Determining the poverty line is done by considering the essential resources that an average human adult consumes in one year and then summing their cost. The largest of these resources is typically the rent required to live in an apartment, so historically, economists have paid particular attention to the real estate market and housing prices as a strong poverty line effector.

Other factors are often thrown in to handle various circumstances, such as whether one is a parent, elderly, a child, married, etc. Some analysts also prefer to factor in "value of life" resource costs, such as entertainment, in societies where merely surviving is considered a little below the true poverty line.

A poverty line is an arbitrary indicator, in the sense that having an income being marginally above it is not substantially different from being marginally below it: the negative effects of poverty tend to be continuous rather than discrete, and the same low income affects different people in different ways. It has been defined in several ways:

Related Articles: absolute poverty relative poverty