What is poverty?

Updated November 2024

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. It can mean going hungry, or without essentials. It is damaging to people’s health and wellbeing, and to children’s life chances.

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 – based solely on incomes and housing costs
• The Social Metric Commission's poverty measure – includes other unavoidable costs, such as childcare

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 more 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 Social Metrics Commission (SMC) has developed a new poverty measure that takes these other factors into account. This is important, because it means that it will count people who are pushed into poverty because of unavoidable costs such as childcare – who might be missed by the official poverty line.

The poverty line for the SMC’s measure is 54% of the median. This figure was chosen to keep the estimate for the number of people in poverty comparable to the official government figure at a fixed point in the past. Subsequently, the two series have been allowed to diverge. The 2024 SMC report estimates that 27% of Londoners are in poverty.

Because it provides a more complete picture of poverty, the SMC’s measure is set to be adopted by the government as an official measure, under the title Below Average Resources.

The chart below shows the poverty rate in London according to these two measures over time.

The SMC measure and deep and persistent poverty

The UK poverty line also doesn’t tell us much about the experiences of people living in 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: under the SMC measurement framework, a family is in deep poverty if they are more than 50% below the SMC poverty line.

The SMC measure is particularly useful when looking at deep poverty and persistent poverty. For example, a 2024 report by the Social Metric Commission found that nearly 40% of Londoners in poverty are in deep poverty, compared to 26% 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 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 24% 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.