Is Latvia rich or poor

A suitable yardstick

The World Bank, arguably the most important development aid institution, defines people as extremely poor when they have less than 1.90 US dollars a day to spend. No wonder that industrialized countries like Germany are as good as free from absolute poverty. In countries like Nigeria and Togo, on the other hand, more than half of the population is affected. Globally, the number of the extremely poor decreased from 1.9 billion in 1990 to 2015 to around 736 million. This decline is all the more remarkable as the world population grew rapidly during this period.

Of course, the World Bank's definition of poverty says little for industrialized countries. For rich countries, the relative risk of income poverty (low income rate) is therefore the usual measure: This includes all those who have less than 60 percent of the needs-weighted median income. The median divides the population into two equal groups: one half has more money, the other half less. The needs weighting is used to make households of different sizes and compositions comparable with one another and is based on the new OECD scale (see glossary). Measured against this, the proportion of the population at risk of relative income poverty (low-income earners) was 15.5 percent in Germany in 2018, according to the microcensus; slightly less than the average for the EU countries. However, the threshold for a person living alone in Germany, at almost 1,000 euros, is about twice as high as, for example, in Portugal.

Despite its popularity, relative income poverty is not a suitable measure of poverty, because even below the 60 percent limit, a reasonable standard of living is possible in many cases, for example if the statistically poor live in their own home or receive support from relatives. This is why it is often referred to as the low income rate. For example, many students fall below the risk of poverty line even though some of them would describe their lives as privileged. The European Commission is therefore looking at two further values: deprivation or considerable material deprivation as well as very low employment. There is considerable material deprivation when four out of nine basic needs cannot be satisfied for financial reasons. This includes, among other things, adequately heating the apartment and being able to afford a warm meal with fish or meat at least every other day. A very low level of gainful employment is given when the actual employment rate of employable household members between the ages of 18 and 59 is less than 20 percent.

Poverty or social exclusion

The EU therefore regards those people at risk of poverty or social exclusion who either have a low income, have to forego many things that seem to be taken for granted, or are only very marginally employed. High earners who squander their money and are therefore broke do not fall under this definition - nor do low earners who manage well thanks to their savings or disciplined housekeeping. In Germany, around 19 percent of people are considered to be at risk of poverty or material deprivation. The lowest values ​​in Europe are recorded in countries such as the Czech Republic, Iceland, Finland and Norway; Eastern European countries such as Bulgaria, Romania and Lithuania have the highest. But Greece and Italy also have high rates (see graphic).

IW Trends: Poverty in Europe
The topic of poverty on the IW website