What is poverty?

People experience poverty when they don’t have enough money or resources to meet basic needs, like not being able to buy food, or to heat their home. If you’re living in poverty, it can impact every part of your life and leave you feeling like you can’t do things that other people take for granted.

Poverty is a complex issue – not least because there’s no one perfect way of measuring it. Any single figure can only show us part of the story, and poverty statistics are only ever snapshots of a particular moment in time. By using different measures of poverty and looking at it through different lenses, we can gain a better picture.

Here we look at some of the main approaches to measuring and understanding poverty.

Measures of poverty

In the UK, there are two main ways that poverty is measured:

• The UK poverty line
• The Social Metric Commission's poverty measure

For a quick summary of the different ways of measuring poverty, scroll to the table at the bottom of this article.

The official UK poverty line

The official poverty line is 60% of the median income of the UK. The median means the middle income – so, if you lined up everybody in the UK based on their income, the median would be the person in the very middle. If you earn less than 60% of what this person does, you’re in poverty. The graphic below illustrates how this works.

You can use this poverty threshold to measure absolute and relative poverty.

• Relative poverty: The number of people earning below 60% of the median income for the current year. Essentially, this shows you how many people are in poverty compared to the rest of the country at that time. Unlike absolute poverty, this line might move up or down each year, because people’s incomes change. This reflects how evenly or unevenly people’s incomes are distributed.
• Absolute poverty: The number of people earning below 60% of the median income in 2010/11, adjusted for inflation. This means that you can look back and see how many people were in poverty each year compared to this fixed line.

The poverty line is set at 60% of median income because this is the international standard. This allows you to make comparisons across countries.

The UK poverty line and housing costs

Poverty can be measured both with and without housing costs taken into account. Housing costs can include rent or mortgage payments, building insurance and water rates.

We usually take housing costs into account when measuring poverty. In London, housing costs are the main thing that pushes people into poverty. When you take housing costs into account more than a million Londoners are judged to be in poverty than when they’re left out.

Social Metric Commission’s poverty measure

The official UK poverty line factors in housing costs, but it doesn’t include many of the other unavoidable costs that push people into poverty. For example, the extra costs faced by Disabled people, or childcare costs. The UK poverty line also doesn’t tell us much about the experiences of people living in poverty.

The Social Metrics Commission (SMC) has developed a new poverty measure that takes these other factors into account. By using a much more complex methodology, the Social Metrics Commission’s poverty measure tells us a lot more about the nature of that poverty. Like who’s most likely to be in deep and persistent poverty.

The poverty line for the SMC’s measure is 54% of the median. This figure has been chosen to keep the estimate for the number of people in poverty as close as possible to the official government figure. The 2023 SMC report estimates that 26% of Londoners are in poverty.

The SMC measure and deep and persistent poverty

Some people cycle in and out of poverty depending on their circumstances. Others experience poverty over a long period of time. This is called persistent poverty and is defined as being in poverty for the current year and at least two of the three preceding years.

Similarly, there are different levels of poverty. If you fall just below the poverty line, you might be able to get by. But if you’re at the other end of the spectrum, you may be going without many of life’s essentials. This is called deep poverty, and it is measured as the number of households living below 40% of the median income. Sometimes, life for people in deep poverty is described as destitution.

The SMC measure is particularly useful when looking at deep poverty and persistent poverty. For example, a 2022 study using the Social Metrics Commission’s framework found that 29% of Londoners in poverty are in deep and persistent poverty, compared to 16% in the rest of the UK.

Minimum Income Standard

Although not strictly a poverty measure, the Minimum Income Standard (MIS) is a way of measuring how many people might be struggling to get by.

MIS measures how much a person needs to afford an acceptable standard of living. This means not just being able to buy the buy basics, but also to actively participate in society by doing things like meeting up with friends for social activities.

MIS is updated every year, and we also fund the Minimum Income Standard London, looking at London specifically.

Because Minimum Income Standards measures how many people can afford to have a decent lifestyle, rather than how many people live in poverty, it often has a higher figure than poverty statistics. For example, the most recent figures show that around 40% of Londoners earn below the Minimum Income Standard, and 25% of Londoners are in poverty (when looking at the official poverty line).

Summary

Find out more

Learn more about poverty in London and the different ways it impacts on people’s live in London’s Poverty Profile.

Read our analysis of the most recent poverty data.