RELATIVE INCOME VERSUS ABSOLUTE INCOME.

RELATIVE INCOME VERSUS ABSOLUTE INCOME. Kids, there is a vigorous debate among economists about the importance of relative income versus absolute income. This article discusses the difference between absolute poverty and relative poverty. The European Union uses a poverty threshold of 60% of “national median equivalized household income”, which is a relative poverty concept. Somebody who has 50% of average European income would fall below the poverty threshhold and be considered poor even though he or she would be very well off compared to the roughly 20% of the people in the world who live on less than a dollar a day (discussed here). An example given here is: “in 1905 an individual in the United States unable to afford a car would probably not feel or be viewed as deprived since cars were a luxury. In 2005, when cars are common, an individual unable to afford a car is likely to be seen as deprived.”