A measure of relative poverty defines "poverty" as being below some relative poverty threshold. An example is when poverty is defined as households with an accumulated income less than 50% of the median income is a measure of relative poverty. Notice that if everyone's real income in an economy increases, but the income distribution stays the same, relative poverty will also stay the same.Relative poverty measurements can produce odd results in small or unusual populations. For example, if the median household in a wealthy neighborhood earns US$1 million each year, then a family that earns US$100,000 would be considered poor on the relative poverty scale. At the other end of the scale, if the median household in a very poor neighborhood earned only 50% of what it needs to buy food, then a person who earned that amount would not be considered poor on a relative poverty scale, even though the person is clearly poor on an absolute poverty scale.
Measures of relative poverty are almost the same as measuring inequality: If a society gets a more equal income distribution, relative poverty will fall. Following this, some argue that the term 'Relative Poverty' is itself misleading and that 'Inequality' should be used instead. They point out that if society changed in a way that hurt high earners more than low ones, then 'relative poverty' would decrease, but every citizen of the society would be worse off. Likewise in the reverse direction: it is possible to reduce absolute poverty while increasing relative poverty.
The phrase relative poverty can also be used in a different sense to mean "moderate poverty" – for example, a standard of living or level of income that is high enough to satisfy basic needs (like water, food, clothing, shelter, and basic health care), but still significantly lower than that of the majority of the population under consideration.
