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Introduction to Sociology 3e

10.2 Global Wealth and Poverty

Introduction to Sociology 3e10.2 Global Wealth and Poverty

Learning Objectives

By the end of this section, you should be able to:

  • Differentiate relative, extreme, and subjective poverty
  • Describe the economic situation of some of the world’s most impoverished areas
  • Explain the cyclical impact of the consequences of poverty
A young, impoverished boy is shown holding a baby girl.
Figure 10.6 This young girl was begging for food in the street in Vietnam, holding a younger child as she was doing so. (Credit: Augapfel/flickr)

What does it mean to be poor? Does it mean being a single mother with two kids in New York City, waiting for the next paycheck in order to buy groceries? Does it mean living with almost no furniture in your apartment because your income doesn’t allow for extras like beds or chairs? Or does it mean having to live with the distended bellies of the chronically malnourished throughout the peripheral nations of Sub-Saharan Africa and South Asia? Poverty has a thousand faces and a thousand gradations; there is no single definition that pulls together every part of the spectrum. You might feel you are poor if you can’t afford cable television or buy your own car. Every time you see a fellow student with a new laptop and smartphone you might feel that you, with your ten-year-old desktop computer, are barely keeping up. However, someone else might look at the clothes you wear and the calories you consume and consider you rich.

Types of Poverty

Social scientists define global poverty in different ways and take into account the complexities and the issues of relativism described above. Relative poverty is a state of living where people can afford necessities but are unable to meet their society’s average standard of living. People often disparage “keeping up with the Joneses”—the idea that you must keep up with the neighbors’ standard of living to not feel deprived. But it is true that you might feel ”poor” if you are living without a car to drive to and from work, without any money for a safety net should a family member fall ill, and without any “extras” beyond just making ends meet.

Contrary to relative poverty, people who live in extreme poverty lack even the basic necessities, which typically include adequate food, clean water, safe housing, and access to healthcare. Extreme poverty occurs when someone lives on less than 1.90 U.S dollars per day.

In prior years, the World Bank—the primary organization analyzing these trends––focused heavily on the number of people under that extreme poverty level of $1.90 per day. (The previous term was "absolute poverty.") In 2018, the World Bank added two more measures to consider: people living on less than $3.20 and people living on less than $5.50. As the number of people in that extreme category continues to decline, these two new categories will be important to recognize the population that lives above the $1.90 line, but still remains vulnerable to extreme poverty. Someone who begins to earn enough to live on more than $1.90 is still in severe poverty and should be considered as such (Schoch 2020).

If you were forced to live on $1.90 a day, or even $5.50, how would you do it? What would you deem worthy of spending money on, and what could you do without? How would you manage the necessities—and how would you make up the gap between what you need to live and what you can afford?

Dilapidated slum dwellings are shown from above.
Figure 10.7 Slums in many countries illustrate absolute poverty all too well. (Credit: Ninara/flickr)

Subjective poverty describes poverty that is composed of many dimensions; it is subjectively present when your actual income does not meet your expectations and perceptions. With the concept of subjective poverty, the poor themselves have a greater say in recognizing when it is present. In short, subjective poverty has more to do with how a person or a family defines themselves. This means that a family subsisting on a few dollars a day in Nepal might think of themselves as doing well, within their perception of normal. However, a westerner traveling to Nepal might visit the same family and see extreme need.

Big Picture

The Underground Economy Around the World

What do the driver of an unlicensed hack cab in New York, a piecework seamstress working from her home in Mumbai, and a street tortilla vendor in Mexico City have in common? They are all members of the underground economy, a loosely defined unregulated market unhindered by taxes, government permits, or human protections. Official statistics before the worldwide recession posit that the underground economy accounted for over 50 percent of nonagricultural work in Latin America; the figure went as high as 80 percent in parts of Asia and Africa (Chen 2001). A recent article in the Wall Street Journal discusses the challenges, parameters, and surprising benefits of this informal marketplace. The wages earned in most underground economy jobs, especially in peripheral nations, are a pittance––a few rupees for a handmade bracelet at a market, or maybe 250 rupees ($5 U.S.) for a day’s worth of fruit and vegetable sales (Barta 2009). But these tiny sums mark the difference between survival and extinction for the world’s poor.

The underground economy has never been viewed very positively by global economists. After all, its members don’t pay taxes, don’t take out loans to grow their businesses, and rarely earn enough to put money back into the economy in the form of consumer spending. But according to the International Labor Organization (an agency of the United Nations), some 52 million people worldwide will lose their jobs due to the ongoing worldwide recession. And while those in core nations know that high unemployment rates and limited government safety nets can be frightening, their situation is nothing compared to the loss of a job for those barely eking out an existence. Once that job disappears, the chance of staying afloat is very slim.

Within the context of this recession, some see the underground economy as a key player in keeping people alive. Indeed, an economist at the World Bank credits jobs created by the informal economy as a primary reason why peripheral nations are not in worse shape during this recession. Women in particular benefit from the informal sector. The majority of economically active women in peripheral nations are engaged in the informal sector, which is somewhat buffered from the economic downturn. The flip side, of course, is that it is equally buffered from the possibility of economic growth.

Even in the United States, the informal economy exists, although not on the same scale as in peripheral and semi-peripheral nations. It might include under-the-table nannies, gardeners, and housecleaners, as well as unlicensed street vendors and taxi drivers. There are also those who run informal businesses, like daycares or salons, from their houses. Analysts estimate that this type of labor may make up 10 percent of the overall U.S. economy, a number that will likely grow as companies reduce head counts, leaving more workers to seek other options. In the end, the article suggests that, whether selling medicinal wines in Thailand or woven bracelets in India, the workers of the underground economy at least have what most people want most of all: a chance to stay afloat (Barta 2009).

Who Are the Impoverished?

Who are the impoverished? Who is living in absolute poverty? The truth that most of us would guess is that the richest countries are often those with the least people. Compare the United States, which possesses a relatively small slice of the population pie and owns by far the largest slice of the wealth pie, with India. These disparities have the expected consequence. The poorest people in the world are women and those in peripheral and semi-peripheral nations. For women, the rate of poverty is particularly worsened by the pressure on their time. In general, time is one of the few luxuries the very poor have, but study after study has shown that women in poverty, who are responsible for all family comforts as well as any earnings they can make, have less of it. The result is that women are suffering more in terms of overall wellbeing (Buvinic 1997). It is harder for females to get credit to expand businesses, to take the time to learn a new skill, or to spend extra hours improving their craft so as to be able to earn at a higher rate.

Global Feminization of Poverty

In almost all societies, women have higher rates of poverty than men. More women and girls live in poor conditions, receive inadequate healthcare, bear the brunt of malnutrition and inadequate drinking water, and so on. This situation goes back decades, and led University of Michigan sociologist Diana Pearce to coin the term "feminization of poverty" in 1978. Throughout the 1990s, data indicated that while overall poverty rates were rising, especially in peripheral nations, the rates of impoverishment increased for women nearly 20 percent more than for men (Mogadham 2005). More recently, as extreme poverty rates continue to fall, women still make up a disproportionate amount of the world's poor. Gender differences are sometimes difficult to discern in international poverty data, but researchers have undertaken efforts to define the makeup of those affected by poverty. Of people aged 25-34, the world has 122 women living in poverty for every 100 men living in poverty. The world's elderly below the poverty line are also more likely to be women (World Bank 2018).

Why is this happening? While myriad variables affect women's poverty, research specializing in this issue identifies three causes (Mogadham 2005):

  1. The expansion in the number of female-headed households
  2. The persistence and consequences of intra-household inequalities and biases against women
  3. The implementation of neoliberal economic policies around the world

While women are living longer and healthier lives today compared to ten years ago, around the world many women are denied basic rights, particularly in the workplace. In peripheral nations, they accumulate fewer assets, farm less land, make less money, and face restricted civil rights and liberties. Women can stimulate the economic growth of peripheral nations, but they are often undereducated and lack access to credit needed to start small businesses. When women are able to attain higher levels of education, they account for significant economic growth within their nations (OECD 2012).

A wide range of organizations undertake programs or provide support in order to improve opportunity, safety, education, equality, and financial outcomes for women. Some of these efforts involve diplomacy, such as one government (or a coalition) working to secure greater rights and improve circumstances of women in other countries. Key areas of focus are reducing institutional and cultural discrimination, ending domestic violence, providing women more agency in decision making, and increasing education for children (Scott 2012). Other programs focus on more immediate needs and opportunities. Microcredit and women's collective savings accounts are ways to provide financial resources for women and families to make important investments, such as building a well at their home to improve health and reduce time spent obtaining clean water. Other uses may involve starting a business, paying a debt, or buying an important appliance or equipment. Unfortunately, these microfinance programs don't have a track record of alleviating poverty, and in some cases they can lead to negative outcomes such as trapping women in a cycle of debt, or increasing domestic violence. Collective savings programs—where local people pool their resources and extend credit within their group—have shown some more positive outcomes (Aizenman 2016 and Niner 2018). The UN has emphasized that microfinance and cultural empowerment would both be more successful if they were used in concert with each other (Scott 2012).


The majority of the poorest countries in the world are in Africa. That is not to say there is not diversity within the countries of that continent; countries like South Africa and Egypt have much lower rates of poverty than Angola and Ethiopia, for instance. Overall, African income levels have been dropping relative to the rest of the world, meaning that Africa as a whole is getting relatively poorer. Making the problem worse, 2014 saw an outbreak of the Ebola virus in western Africa, leading to a public health crisis and an economic downturn due to loss of workers and tourist dollars.

Why is Africa in such dire straits? Much of the continent’s poverty can be traced to the availability of land, especially arable land (land that can be farmed). Centuries of struggle over land ownership have meant that much useable land has been ruined or left unfarmed, while many countries with inadequate rainfall have never set up an infrastructure to irrigate. Many of Africa’s natural resources were long ago taken by colonial forces, leaving little agricultural and mineral wealth on the continent.

Further, African poverty is worsened by civil wars and inadequate governance that are the result of a continent re-imagined with artificial colonial borders and leaders. Consider the example of Rwanda. There, two ethnic groups cohabitated with their own system of hierarchy and management until Belgians took control of the country in 1915 and rigidly confined members of the population into two unequal ethnic groups. While, historically, members of the Tutsi group held positions of power, the involvement of Belgians led to the Hutu seizing power during a 1960s revolt. This ultimately led to a repressive government and genocide against Tutsis that left hundreds of thousands of Rwandans dead or living in diaspora (U.S. Department of State 2011c). The painful rebirth of a self-ruled Africa has meant many countries bear ongoing scars as they try to see their way towards the future (World Poverty 2012a). In 2020, armed conflicts were underway in regions of nations including the Tigray conflict in Ethiopia, the Kamwina Nsapo rebellion in Democratic Republic of Congo, the Boko Haram insurgency in Nigeria and neighboring countries, and several more. While most of the ongoing conflicts are considered minor, they are both dangerous and disruptive to the people living in those regions, and several have included ethnic cleansing, mass kidnapping, extensive sexual violence, and use of child soldiers.


A young person is pictured in a small structure without complete walls or doors. A pot sits over an open flame, and a few bowls and buckets are arrayed on shelves and on the floor.
Figure 10.8 For children who have homes in slums like this one in Phnom Phen, Cambodia, survival and safety are often the primary and immediate concerns. Longer-term goals, such as education and social mobility, may not be available options. (Credit: ND Strupler)

While the majority of the world’s poorest countries are in Africa, the majority of the world’s poorest people are in Asia. As in Africa, Asia finds itself with disparity in the distribution of poverty, with Japan and South Korea holding much more wealth than India and Cambodia. In fact, most poverty is concentrated in South Asia. One of the most pressing causes of poverty in Asia is simply the pressure that the size of the population puts on its resources. Unlike Africa, many people living in poverty reside in urban areas, often in crowded, unhygenic conditions with limited access to water and resources. Estimates indicate that Asia has 60 percent of the world's people who live in slums (WorldVision 2019). Those who find work often do so in garment factories or other manufacturing facilities, where pay is very low and the demands are incredibly high. (See the feature below on sweatshop labor.) Children are sent to work in these conditions as well.

Asia is also frequently impacted by natural disasters. Countries like India, Bangladesh, Vietnam, Thailand, and the Philippines experience frequent typhoons (hurricanes) and flooding. For those living in insecure structures —often constructed from various leftover materials and not subject to any type of building codes—such events can leave entire swaths of the population homeless and vulnerable to disease or injury (WorldVision 2019).


The Middle East and North Africa region (MENA) includes oil-rich countries in the Gulf, such as Iran, Iraq, and Kuwait, but also countries that are relatively resource-poor in relationship to their populations, such as Morocco and Yemen. These countries are predominately Islamic. For the last quarter-century, economic growth was slower in MENA than in other developing economies, and almost a quarter of the 300 million people who make up the population live on less than $2.00 a day (World Bank 2013).

The International Labour Organization tracks the way income inequality influences social unrest. The two regions with the highest risk of social unrest are Sub-Saharan Africa and the Middle East-North Africa region (International Labour Organization 2012). Increasing unemployment and high socioeconomic inequality in MENA were major factors in the Arab Spring, which—beginning in 2010—toppled dictatorships throughout the Middle East in favor of democratically elected government. Unemployment and income inequalities are still being blamed on immigrants, foreign nationals, and ethnic/religious minorities.

Sociology in the Real World

Sweatshops and Student Protests: Who’s Making Your Team Spirit?

A group of students stage a protest. They are holding signs and a number of them are wearing no shirts or have only their signs covering their bodies.
Figure 10.9 These protesters seek to bring attention to the issue of sweatshop labor in producing clothing. (Credit: Jo Guldi/flickr)

Most of us don’t pay too much attention to where our favorite products are made. And certainly when you’re shopping for a college sweatshirt or ball cap to wear to a school football game, you probably don’t turn over the label, check who produced the item, and then research whether or not the company has fair labor practices. But for the members of USAS—United Students Against Sweatshops—that’s exactly what they do. The organization, which was founded in 1997, has waged countless battles against both apparel makers and other multinational corporations that do not meet what USAS considers fair working conditions and wages. USAS also focuses on ensuring safe and non-exploitative conditions as well as improved pay and benefits for campus workers, including dining hall staff, security guards, and adjuncts (USAS 2021).

How do clothes get made, and why are garment workers among the most commonly mistreated? In many cases, large apparel companies—including Nike, Lululemon, H&M, Urban Outfitters (owner of Anthropologie and Free People), Zara, and most other major brands—outsource their manufacturing to factories around the world. The apparel companies negotiate prices and schedules with the local manufacturers, and often push for the lowest possible manufacturing cost and the fastest schedule. In order to keep up with demand and manufacture the clothing at the required cost, the factories may pay their employees less, force them to work longer hours, and may maintain unsafe conditions. All of those tactics are associated with sweatshop practices (Chan 2019). In response to action from organizations like USAS, many apparel companies have undertaken steps to ensure that the factories they use are treating workers properly, but in reality, it is very difficult to know for sure. Often, the brands work through subcontractors and subsidiaries, and may not know exactly which factories are producing their products.

Members of USAS helped form the Worker Rights Consortium (WRC), which monitors working conditions for a wide array of companies and their affiliated factories. WRC conducts regular reviews of worldwide manufacturing facilities and publishes the results. The WRC also studies and reports on overall economic conditions and their effect on employment. For example, in 2020, as the global economy went through a rapid downturn, apparel companies demanded lower prices while they also reduced their orders, which put workers at risk of exploitation or job loss (Karim 2020).

Consequences of Poverty

A person holds a baby who appears to be about two years old. The baby is on an examination table. In the background are boxes of medicine.
Figure 10.10 For this child, who is being assessed for malnutrition at a clinic in Kenya, risks associated with poverty and lack of food were exacerbated by a massive drought that hit the region. (Credit: DFID - UK Department for International Development/flickr)

Not surprisingly, the consequences of poverty are often also causes. The poor often experience inadequate healthcare, limited education, and the inaccessibility of birth control. But those born into these conditions are incredibly challenged in their efforts to break out since these consequences of poverty are also causes of poverty, perpetuating a cycle of disadvantage.

According to sociologists Neckerman and Torche (2007) in their analysis of global inequality studies, the consequences of poverty are many. Neckerman and Torche have divided them into three areas. The first, termed “the sedimentation of global inequality,” relates to the fact that once poverty becomes entrenched in an area, it is typically very difficult to reverse. As mentioned above, poverty exists in a cycle where the consequences and causes are intertwined. The second consequence of poverty is its effect on physical and mental health. Poor people face physical health challenges, including malnutrition and high infant mortality rates. Mental health is also detrimentally affected by the emotional stresses of poverty, with relative deprivation carrying the most robust effect. Again, as with the ongoing inequality, the effects of poverty on mental and physical health become more entrenched as time goes on. Neckerman and Torche’s third consequence of poverty is the prevalence of crime. Cross-nationally, crime rates are higher, particularly for violent crime, in countries with higher levels of income inequality (Fajnzylber 2002).


While most of us are accustomed to thinking of slavery in terms of the antebellum South, modern day slavery goes hand-in-hand with global inequality. In short, slavery refers to any situation in which people are sold, treated as property, or forced to work for little or no pay. Just as in the pre-Civil War United States, these humans are at the mercy of their employers. Chattel slavery, the form of slavery once practiced in the American South, occurs when one person owns another as property. Child slavery, which may include child prostitution, is a form of chattel slavery. In debt bondage, or bonded labor, the poor pledge themselves as servants in exchange for the cost of basic necessities like transportation, room, and board. In this scenario, people are paid less than they are charged for room and board. When travel is required, they can arrive in debt for their travel expenses and be unable to work their way free, since their wages do not allow them to ever get ahead.

The global watchdog group Anti-Slavery International recognizes other forms of slavery: human trafficking (in which people are moved away from their communities and forced to work against their will), child domestic work and child labor, and certain forms of servile marriage, in which women are little more than enslaved people (Anti-Slavery International 2012).

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