Box 1 Measuring poverty Approaches to measuring poverty can be divided into monetary and non-monetary, as reflected in the first two targets of Sustainable Development Goal (SDG) 1 – to eradicate extreme poverty (Target 1.1) and to halve poverty in all its dimensions (Target 1.2). Monetary poverty The first SDG indicator relates to extreme monetary poverty (less than $2.15 per person per day)5. This type of poverty is rare in wealthy countries. We use an alternative measure of relative income poverty, often used in these countries. Non-monetary poverty (material deprivation) A second approach focuses on lack of access to items or services that are deemed necessary within a given context. This approach is often called ‘multidimensional’ poverty. People are defined as poor if they lack access to one or more of a list of items and services. Non-monetary poverty (subjective) A third approach – becoming more common – is to seek people’s subjective experience of poverty. For example, people can be asked how they are managing financially – whether they are ‘managing well’, ‘just about coping’ or ‘struggling to make ends meet’. The report presents evidence, in relation to children, using all three approaches, although data are most readily available for monetary poverty. Headline measure: Relative income poverty Based on the best available data, the headline measure in this report is relative income poverty – that is, the proportion of people who fall below a threshold relative to the income of the average person in the population. In this case, the threshold used is an ‘equivalised’ income below 60 per cent of the median. Equivalised incomes take account of variations in household size, as there are savings from living in larger households. In this report, this measure is referred to as ‘child income poverty’ or simply as ‘child poverty’. Other organizations sometimes use different terms. For example, the EU refers to it as ‘at risk of poverty’. Like all measures, relative income poverty has strengths and weaknesses. Because it refers to the income of the average person (the median income), it is closely related to income inequality in a country. And as the income of the person rises (or falls), the poverty threshold will change. It may therefore seem that it is impossible to reduce or eliminate relative income poverty. But this is not true. First, as we will show, countries with similar wealth have hugely different poverty rates based on this measure. Second, because it refers to a median – that is, the income of the middle person when everyone is ranked on their income – it is possible to eliminate relative income poverty. Ensuring that every person in the country had an income of at least 60 per cent of that of the median person would not directly change the median. While no country in this report achieves a relative child income poverty rate much lower than about 10 per cent, if one uses a threshold of 50 per cent of the median, some countries have, in the past, achieved rates below 3 per cent.6 7 Child Poverty in the Midst of Wealth Innocenti Report Card 18