This paper reviewed the concept of absolute and relative poverty and tried to prove the validity of regarding absolute poverty and relative poverty as different level of living. 3 stage poverty lines were set and policy implication of 3 poverty lines ...
This paper reviewed the concept of absolute and relative poverty and tried to prove the validity of regarding absolute poverty and relative poverty as different level of living. 3 stage poverty lines were set and policy implication of 3 poverty lines were discussed. 'This study is summarized as follows.
Absolute poverty is redefined as a situation when monthly disposable income of a family is not enough to support necessary goods and services to maintain biological existence level of living. And relative poverty is redefined as a situation where a minimum standard of monthly disposable income is relatively insufficient compared to a specific society's average living standard under the condition that basic needs on the biological existence level has been satisfied. Defined this way, absolute poverty and relative poverty are mutually exclusive concepts and in the category of 2 different level of living.
The floor of poverty was considered as bottom line of relative poverty and ceiling was considered as the standard budget. Between floor and ceiling relative poverty lines were set. Using these standard lines 4 poverty bands were categorized as follows:
Standard Budget ------------------------------
Minimum Health and Decency Level
Relative Poverty Line ==============================
Relative Poverty Level
Bottom Line of Relative Poverty ------------------------------
Biological Existence Level
Absolute Poverty Line -----------------------------
Starvation Level
Market Basket method was used to estimate poverty lines. In order to reduce subjective arbitrariness in the composition of market basket the data was drawn from the 1993 Survey of Urban Household Consumer Expenditure Survey and 15,890 households consisting of 4 family members were chosen and 43 consumption items and income have been analyzed. 20 strata were categorized according to consumption amount. The standard for absolute and bottom line of relative poverty line were consumption of 1/20 strata's average consumption.
Procedure to estimate relative poverty line were as follow:
1) ordinally line up the whole samples, 2) 20 strata were categorized according to consumption amount(0-5%, 6-10%, .........95-20%), 3) calculate average consumption amount of 43 items of each strata, 4) calculate average percentage of each item in the total consumption, income elasticity and Gini Coefficient, 5) Change of average consumption amount, average percentage, income elasticity according to strata change has been analyzed, 6) checked whether there was poverty threshold and if poverty threshold has been found set that point as poverty line, 6) if poverty line couldn't be found between bottom and ceiling range, pure and quasi relative poverty method were used to set poverty line, 7) set lines were compared with the result of previous researches and poverty lines estimated by other objective methods. 8) poverty lines of each items were summed together. However, minimum food expenditure estimation didn't follow the above procedure and was calculated by dietist Park, H. R. considering nutritional standard.
In 1993 4 member households of each poverty lines were 335,664won for absolute poverty, 549,172 won for bottom line of relative poverty and 1,075,406 won for relative poverty. These amount were converted as 1995 poverty lines as 393,331won for absolute poverty, 643,519 won for bottom line of relative poverty and 1,260,161 won for relative poverty. Households below bottom line of relative poverty were 4.1 % and below relative poverty were 32.5%.
Policy implication of these 3 level poverty lines were discussed as follow:
1) Official poverty line(selection standard of official living protection) and government's living protection level should be equal and needs to be adjusted to bottom line of relative poverty line using equivalence scale according to household size. And the gap between household's income and standard should be supplemented by government. And also income after deduction of rent should be considered as income.
2) Standard for Education aid needs to be adjusted upward to relative poverty line and equivalence scale according to numbers and age of students be used. Financial aids programs needs to be adjusted upward to standard budget level and interest rates be adjusted from zero interest rate to 3%, 6% and 9%according to level of living. Medical aid also be adjusted upward to relative level of living.
3) The concept of nuclear family need to be adopted and in case of supporting disabled or old relatives. Supporting household be eligible to receive living cost of them, when his income is less than relative poverty line Man and woman be equally treated in defining family member. poor (Jahwal) protection system is to be cancelled.
4) 3level poverty lines can be utilized flexibly and the system to help working poor people under relative poverty line should be adopted
5) Appropriate minimum wage in 1995 was between 389,300 won and 198,847 won.
To perform the proposed policy implication increase in the welfare budget is urged And investment on the public goods i. e. education, housing, etc. should be increased.