assignment of poverty

Global Progress in Reducing Extreme Poverty Grinds to a Halt

By 2030, Nearly 600 Million People Will Struggle on Less Than $2.15 a Day

WASHINGTON, Oct. 5, 2022 —The world is unlikely to meet the goal of ending extreme poverty by 2030 absent history-defying rates of economic growth over the remainder of this decade, according to a new World Bank study. The study finds that COVID-19 dealt the biggest setback to global poverty-reduction efforts since 1990 and the war in Ukraine threatens to make matters worse.

The Bank’s latest Poverty and Shared Prosperity Report provides the first comprehensive look at the global landscape of poverty in the aftermath of the extraordinary series of shocks to the global economy over the past few years. It estimates that the pandemic pushed about 70 million people into extreme poverty in 2020, the largest one-year increase since global poverty monitoring began in 1990. As a result, an estimated 719 million people subsisted on less than $2.15 a day by the end of 2020.

“Progress in reducing extreme poverty has essentially halted in tandem with subdued global economic growth,” said World Bank Group President David Malpass . “Of concern to our mission is the rise in extreme poverty and decline of shared prosperity brought by inflation, currency depreciations, and broader overlapping crises facing development. It means a grim outlook for billions of people globally. Adjustments of macroeconomic policies are needed to improve the allocation of global capital, foster currency stability, reduce inflation, and restart growth in median income. The alternative is the status quo—slowing global growth, higher interest rates, greater risk aversion, and fragility in many developing countries.”

The report indicates 2020 marked a historic turning point—when the era of global income convergence yielded to divergence. The poorest people bore the steepest costs of the pandemic: income losses averaged 4% for the poorest 40%, double the losses of the wealthiest 20% of the income distribution. Global inequality rose, as a result, for the first time in decades.

Strong fiscal policy measures made a notable difference in reducing COVID-19’s impact on poverty. In fact, the average poverty rate in developing economies would have been 2.4 percentage points higher without a fiscal response. Yet government spending proved far more beneficial to poverty reduction in the wealthiest countries, which generally managed to fully offset COVID-19’s impact on poverty through fiscal policy and other emergency support measures. Developing economies had fewer resources and therefore spent less and achieved less: upper-middle-income economies offset just 50% of the poverty impact, and low- and lower-middle income economies offset barely a quarter of the impact.

“ Over the next decade, investing in better health and education will be crucial for developing economies, given the severe learning losses and health-related setbacks they suffered during the pandemic ,” said Indermit Gill, the World Bank’s Chief Economist and Senior Vice President for Development Economics . “In a time of record debt and depleted fiscal resources, this will not be easy. Governments will need to concentrate their resources on building human capital and maximizing growth.”

The new report is the first to provide current and historical data on the new global extreme-poverty line , which has been adjusted upward to $2.15 a day to reflect the latest 2017 purchasing-power-parity data . Extreme poverty fell dramatically across the world from 1990 through 2019, the latest year for which official data are available. But progress slowed after 2014, and policymakers now confront a tougher environment: Extreme poverty is concentrated in parts of the world where it will be hardest to eradicate—in Sub-Saharan Africa, in conflict-affected areas, and in rural areas.

Sub-Saharan Africa now accounts for 60% of all people in extreme poverty—389 million, more than any other region. The region’s poverty rate is about 35%, the world’s highest. To achieve the 2030 poverty goal, each country in the region would need to achieve per-capita GDP growth of 9% per year for the remainder of this decade. That’s an exceptionally high hurdle for countries whose per-capita GDP growth averaged 1.2 percent in the decade before COVID-19.

National policy reforms can help restart progress in reducing poverty, the report finds. Stepped-up global cooperation will also be necessary. In fiscal policy, governments should act promptly on three fronts:

• Avoid broad subsidies, increase targeted cash transfers: Half of all spending on energy subsidies in low- and middle- income economies goes to the richest 20 percent of the population who consume more energy. Cash transfers are a far more effective mechanism for supporting poor and vulnerable groups.
• Focus on long-term growth: High-return investments in education, research and development, and infrastructure projects need to be made today. In a time of scarce resources, more efficient spending and improved preparation for the next crisis will be key.
• Mobilize domestic revenues without hurting the poor . Property taxes and carbon taxes can help raise revenue without hurting the poorest. So can broadening the base of personal and corporate income taxes. If sales and excise taxes do need to be raised, governments should minimize economic distortions and negative distributional impacts by simultaneously using targeted cash transfers to offset their effects on the most vulnerable households.

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2.3: Explaining Poverty

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Learning Objectives

• Describe the assumptions of the functionalist and conflict views of stratification and of poverty.
• Explain the focus of symbolic interactionist work on poverty.
• Understand the difference between the individualist and structural explanations of poverty.

Why does poverty exist, and why and how do poor people end up being poor? The sociological perspectives introduced in Chapter 1 “Understanding Social Problems” provide some possible answers to these questions through their attempt to explain why American society is stratified —that is, why it has a range of wealth ranging from the extremely wealthy to the extremely poor. We review what these perspectives say generally about social stratification (rankings of people based on wealth and other resources a society values) before turning to explanations focusing specifically on poverty.

In general, the functionalist perspective and conflict perspective both try to explain why social stratification exists and endures, while the symbolic interactionist perspective discusses the differences that stratification produces for everyday interaction. Table 2.2 “Theory Snapshot” summarizes these three approaches.

Table 2.2 Theory Snapshot

The Functionalist View

As discussed in Chapter 1 “Understanding Social Problems” , functionalist theory assumes that society’s structures and processes exist because they serve important functions for society’s stability and continuity. In line with this view, functionalist theorists in sociology assume that stratification exists because it also serves important functions for society. This explanation was developed more than sixty years ago by Kingsley Davis and Wilbert Moore (Davis & Moore, 1945) in the form of several logical assumptions that imply stratification is both necessary and inevitable. When applied to American society, their assumptions would be as follows:

• Some jobs are more important than other jobs. For example, the job of a brain surgeon is more important than the job of shoe shining.
• Some jobs require more skills and knowledge than other jobs. To stay with our example, it takes more skills and knowledge to perform brain surgery than to shine shoes.
• Relatively few people have the ability to acquire the skills and knowledge that are needed to do these important, highly skilled jobs. Most of us would be able to do a decent job of shining shoes, but very few of us would be able to become brain surgeons.
• To encourage the people with the skills and knowledge to do the important, highly skilled jobs, society must promise them higher incomes or other rewards. If this is true, some people automatically end up higher in society’s ranking system than others, and stratification is thus necessary and inevitable.

To illustrate their assumptions, say we have a society where shining shoes and doing brain surgery both give us incomes of $150,000 per year. (This example is very hypothetical, but please keep reading.) If you decide to shine shoes, you can begin making this money at age 16, but if you decide to become a brain surgeon, you will not start making this same amount until about age 35, as you must first go to college and medical school and then acquire several more years of medical training. While you have spent nineteen additional years beyond age 16 getting this education and training and taking out tens of thousands of dollars in student loans, you could have spent those years shining shoes and making $150,000 a year, or $2.85 million overall. Which job would you choose?

Functional theory argues that the promise of very high incomes is necessary to encourage talented people to pursue important careers such as surgery. If physicians and shoe shiners made the same high income, would enough people decide to become physicians?

Public Domain Images – CC0 public domain.

As this example suggests, many people might not choose to become brain surgeons unless considerable financial and other rewards awaited them. By extension, we might not have enough people filling society’s important jobs unless they know they will be similarly rewarded. If this is true, we must have stratification. And if we must have stratification, then that means some people will have much less money than other people. If stratification is inevitable, then, poverty is also inevitable. The functionalist view further implies that if people are poor, it is because they do not have the ability to acquire the skills and knowledge necessary for the important, high-paying jobs.

The functionalist view sounds very logical, but a few years after Davis and Moore published their theory, other sociologists pointed out some serious problems in their argument (Tumin, 1953; Wrong, 1959).

First, it is difficult to compare the importance of many types of jobs. For example, which is more important, doing brain surgery or mining coal? Although you might be tempted to answer with brain surgery, if no coal were mined then much of our society could not function. In another example, which job is more important, attorney or professor? (Be careful how you answer this one!)

Second, the functionalist explanation implies that the most important jobs have the highest incomes and the least important jobs the lowest incomes, but many examples, including the ones just mentioned, counter this view. Coal miners make much less money than physicians, and professors, for better or worse, earn much less on the average than lawyers. A professional athlete making millions of dollars a year earns many times the income of the president of the United States, but who is more important to the nation? Elementary school teachers do a very important job in our society, but their salaries are much lower than those of sports agents, advertising executives, and many other people whose jobs are far less essential.

Third, the functionalist view assumes that people move up the economic ladder based on their abilities, skills, knowledge, and, more generally, their merit. This implies that if they do not move up the ladder, they lack the necessary merit. However, this view ignores the fact that much of our stratification stems from lack of equal opportunity. As later chapters in this book discuss, because of their race, ethnicity, gender, and class standing at birth, some people have less opportunity than others to acquire the skills and training they need to fill the types of jobs addressed by the functionalist approach.

Finally, the functionalist explanation might make sense up to a point, but it does not justify the extremes of wealth and poverty found in the United States and other nations. Even if we do have to promise higher incomes to get enough people to become physicians, does that mean we also need the amount of poverty we have? Do CEOs of corporations really need to make millions of dollars per year to get enough qualified people to become CEOs? Do people take on a position as CEO or other high-paying job at least partly because of the challenge, working conditions, and other positive aspects they offer? The functionalist view does not answer these questions adequately.

One other line of functionalist thinking focuses more directly on poverty than generally on stratification. This particular functionalist view provocatively argues that poverty exists because it serves certain positive functions for our society. These functions include the following: (1) poor people do the work that other people do not want to do; (2) the programs that help poor people provide a lot of jobs for the people employed by the programs; (3) the poor purchase goods, such as day-old bread and used clothing, that other people do not wish to purchase, and thus extend the economic value of these goods; and (4) the poor provide jobs for doctors, lawyers, teachers, and other professionals who may not be competent enough to be employed in positions catering to wealthier patients, clients, students, and so forth (Gans, 1972). Because poverty serves all these functions and more, according to this argument, the middle and upper classes have a vested interested in neglecting poverty to help ensure its continued existence.

The Conflict View

Because he was born in a log cabin and later became president, Abraham Lincoln’s life epitomizes the American Dream, which is the belief that people born into poverty can become successful through hard work. The popularity of this belief leads many Americans to blame poor people for their poverty.

US Library of Congress – public domain.

Conflict theory’s explanation of stratification draws on Karl Marx’s view of class societies and incorporates the critique of the functionalist view just discussed. Many different explanations grounded in conflict theory exist, but they all assume that stratification stems from a fundamental conflict between the needs and interests of the powerful, or “haves,” in society and those of the weak, or “have-nots” (Kerbo, 2012). The former take advantage of their position at the top of society to stay at the top, even if it means oppressing those at the bottom. At a minimum, they can heavily influence the law, the media, and other institutions in a way that maintains society’s class structure.

In general, conflict theory attributes stratification and thus poverty to lack of opportunity from discrimination and prejudice against the poor, women, and people of color. In this regard, it reflects one of the early critiques of the functionalist view that the previous section outlined. To reiterate an earlier point, several of the remaining chapters of this book discuss the various obstacles that make it difficult for the poor, women, and people of color in the United States to move up the socioeconomic ladder and to otherwise enjoy healthy and productive lives.

Symbolic Interactionism

Consistent with its micro orientation, symbolic interactionism tries to understand stratification and thus poverty by looking at people’s interaction and understandings in their daily lives. Unlike the functionalist and conflict views, it does not try to explain why we have stratification in the first place. Rather, it examines the differences that stratification makes for people’s lifestyles and their interaction with other people.

Many detailed, insightful sociological books on the lives of the urban and rural poor reflect the symbolic interactionist perspective (Anderson, 1999; C. M. Duncan, 2000; Liebow, 1993; Rank, 1994). These books focus on different people in different places, but they all make very clear that the poor often lead lives of quiet desperation and must find ways of coping with the fact of being poor. In these books, the consequences of poverty discussed later in this chapter acquire a human face, and readers learn in great detail what it is like to live in poverty on a daily basis.

Some classic journalistic accounts by authors not trained in the social sciences also present eloquent descriptions of poor people’s lives (Bagdikian, 1964; Harrington, 1962). Writing in this tradition, a newspaper columnist who grew up in poverty recently recalled, “I know the feel of thick calluses on the bottom of shoeless feet. I know the bite of the cold breeze that slithers through a drafty house. I know the weight of constant worry over not having enough to fill a belly or fight an illness…Poverty is brutal, consuming and unforgiving. It strikes at the soul” (Blow, 2011).

Sociological accounts of the poor provide a vivid portrait of what it is like to live in poverty on a daily basis.

Pixabay – CC0 public domain.

On a more lighthearted note, examples of the symbolic interactionist framework are also seen in the many literary works and films that portray the difficulties that the rich and poor have in interacting on the relatively few occasions when they do interact. For example, in the film Pretty Woman , Richard Gere plays a rich businessman who hires a prostitute, played by Julia Roberts, to accompany him to swank parties and other affairs. Roberts has to buy a new wardrobe and learn how to dine and behave in these social settings, and much of the film’s humor and poignancy come from her awkwardness in learning the lifestyle of the rich.

Specific Explanations of Poverty

The functionalist and conflict views focus broadly on social stratification but only indirectly on poverty. When poverty finally attracted national attention during the 1960s, scholars began to try specifically to understand why poor people become poor and remain poor. Two competing explanations developed, with the basic debate turning on whether poverty arises from problems either within the poor themselves or in the society in which they live (Rank, 2011). The first type of explanation follows logically from the functional theory of stratification and may be considered an individualistic explanation. The second type of explanation follows from conflict theory and is a structural explanation that focuses on problems in American society that produce poverty. Table 2.3 “Explanations of Poverty” summarizes these explanations.

Table 2.3 Explanations of Poverty

It is critical to determine which explanation makes more sense because, as sociologist Theresa C. Davidson (Davidson, 2009) observes, “beliefs about the causes of poverty shape attitudes toward the poor.” To be more precise, the particular explanation that people favor affects their view of government efforts to help the poor. Those who attribute poverty to problems in the larger society are much more likely than those who attribute it to deficiencies among the poor to believe that the government should do more to help the poor (Bradley & Cole, 2002). The explanation for poverty we favor presumably affects the amount of sympathy we have for the poor, and our sympathy, or lack of sympathy, in turn affects our views about the government’s role in helping the poor. With this backdrop in mind, what do the individualistic and structural explanations of poverty say?

Individualistic Explanation

According to the individualistic explanation , the poor have personal problems and deficiencies that are responsible for their poverty. In the past, the poor were thought to be biologically inferior, a view that has not entirely faded, but today the much more common belief is that they lack the ambition and motivation to work hard and to achieve success. According to survey evidence, the majority of Americans share this belief (Davidson, 2009). A more sophisticated version of this type of explanation is called the culture of poverty theory (Banfield, 1974; Lewis, 1966; Murray, 2012). According to this theory, the poor generally have beliefs and values that differ from those of the nonpoor and that doom them to continued poverty. For example, they are said to be impulsive and to live for the present rather than the future.

Regardless of which version one might hold, the individualistic explanation is a blaming-the-victim approach (see Chapter 1 “Understanding Social Problems” ). Critics say this explanation ignores discrimination and other problems in American society and exaggerates the degree to which the poor and nonpoor do in fact hold different values (Ehrenreich, 2012; Holland, 2011; Schmidt, 2012). Regarding the latter point, they note that poor employed adults work more hours per week than wealthier adults and that poor parents interviewed in surveys value education for their children at least as much as wealthier parents. These and other similarities in values and beliefs lead critics of the individualistic explanation to conclude that poor people’s poverty cannot reasonably be said to result from a culture of poverty.

Structural Explanation

According to the second, structural explanation , which is a blaming-the-system approach, US poverty stems from problems in American society that lead to a lack of equal opportunity and a lack of jobs. These problems include (a) racial, ethnic, gender, and age discrimination; (b) lack of good schooling and adequate health care; and (c) structural changes in the American economic system, such as the departure of manufacturing companies from American cities in the 1980s and 1990s that led to the loss of thousands of jobs. These problems help create a vicious cycle of poverty in which children of the poor are often fated to end up in poverty or near poverty themselves as adults.

As Rank (Rank, 2011) summarizes this view, “American poverty is largely the result of failings at the economic and political levels, rather than at the individual level…In contrast to [the individualistic] perspective, the basic problem lies in a shortage of viable opportunities for all Americans.” Rank points out that the US economy during the past few decades has created more low-paying and part-time jobs and jobs without benefits, meaning that Americans increasingly find themselves in jobs that barely lift them out of poverty, if at all. Sociologist Fred Block and colleagues share this critique of the individualistic perspective: “Most of our policies incorrectly assume that people can avoid or overcome poverty through hard work alone. Yet this assumption ignores the realities of our failing urban schools, increasing employment insecurities, and the lack of affordable housing, health care, and child care. It ignores the fact that the American Dream is rapidly becoming unattainable for an increasing number of Americans, whether employed or not” (Block, et. al., 2006).

Most sociologists favor the structural explanation. As later chapters in this book document, racial and ethnic discrimination, lack of adequate schooling and health care, and other problems make it difficult to rise out of poverty. On the other hand, some ethnographic research supports the individualistic explanation by showing that the poor do have certain values and follow certain practices that augment their plight (Small, et. al., 2010). For example, the poor have higher rates of cigarette smoking (34 percent of people with annual incomes between $6,000 and $11,999 smoke, compared to only 13 percent of those with incomes $90,000 or greater [Goszkowski, 2008]), which helps cause them to have more serious health problems.

Adopting an integrated perspective, some researchers say these values and practices are ultimately the result of poverty itself (Small et, al., 2010). These scholars concede a culture of poverty does exist, but they also say it exists because it helps the poor cope daily with the structural effects of being poor. If these effects lead to a culture of poverty, they add, poverty then becomes self-perpetuating. If poverty is both cultural and structural in origin, these scholars say, efforts to improve the lives of people in the “other America” must involve increased structural opportunities for the poor and changes in some of their values and practices.

Key Takeaways

• According to the functionalist view, stratification is a necessary and inevitable consequence of the need to use the promise of financial reward to encourage talented people to pursue important jobs and careers.
• According to conflict theory, stratification results from lack of opportunity and discrimination against the poor and people of color.
• According to symbolic interactionism, social class affects how people interact in everyday life and how they view certain aspects of the social world .
• The individualistic view attributes poverty to individual failings of poor people themselves, while the structural view attributes poverty to problems in the larger society.

For Your Review

• In explaining poverty in the United States, which view, individualist or structural, makes more sense to you? Why?
• Suppose you could wave a magic wand and invent a society where everyone had about the same income no matter which job he or she performed. Do you think it would be difficult to persuade enough people to become physicians or to pursue other important careers? Explain your answer.

Anderson, E. (1999). Code of the street: Decency, violence, and the moral life of the inner city . New York, NY: W. W. Norton.

Bagdikian, B. H. (1964). In the midst of plenty: The poor in America . Boston, MA: Beacon Press.

Banfield, E. C. (1974). The unheavenly city revisited . Boston, MA: Little, Brown.

Block, F., Korteweg, A. C., & Woodward, K. (2006). The compassion gap in American poverty policy. Contexts, 5 (2), 14–20.

Blow, C. M. (2011, June 25). Them that’s not shall lose. New York Times , p. A19.

Bradley, C., & Cole, D. J. (2002). Causal attributions and the significance of self-efficacy in predicting solutions to poverty. Sociological Focus, 35 , 381–396.

Davidson, T. C. (2009). Attributions for poverty among college students: The impact of service-learning and religiosity. College Student Journal, 43 , 136–144.

Davis, K., & Moore, W. (1945). Some principles of stratification. American Sociological Review, 10 , 242–249.

Duncan, C. M. (2000). Worlds apart: Why poverty persists in rural America . New Haven, CT: Yale University Press.

Ehrenreich, B. (2012, March 15). What “other America”? Salon.com . Retrieved from http://www.salon.com/2012/03/15/the_truth_about_the_poor/ .

Gans, H. J. (1972). The positive functions of poverty. American Journal of Sociology, 78 , 275–289.

Goszkowski, R. (2008). Among Americans, smoking decreases as income increases. Retrieved from http://www.gallup.com/poll/105550/among-americans-smoking-decreases-income-increases.aspx .

Harrington, M. (1962). The other America: Poverty in the United States . New York, NY: Macmillan.

Holland, J. (2011, July 29). Debunking the big lie right-wingers use to justify black poverty and unemployment. AlterNet . Retrieved from http://www.alternet.org/story/151830/debunking_the_big_lie_right-wingers_use_to_justify_black_poverty _and_unemployment_?page=entire .

Kerbo, H. R. (2012). Social stratification and inequality . New York, NY: McGraw-Hill.

Lewis, O. (1966). The culture of poverty. Scientific American, 113 , 19–25.

Liebow, E. (1993). Tell them who I am: The lives of homeless women . New York, NY: Free Press.

Murray, C. (2012). Coming apart: The state of white America, 1960–2010 . New York, NY: Crown Forum.

Rank, M. R. (1994). Living on the edge: The realities of welfare in America . New York, NY: Columbia University Press.

Rank, M. R. (2011). Rethinking American poverty. Contexts, 10 (Spring), 16–21.

Schmidt, P. (2012, February 12). Charles Murray, author of the “Bell Curve,” steps back into the ring. The Chronicle of Higher Education . Retrieved from http://chronicle.com/article/Charles-Murray-Author-of-The/130722/?sid=at&utm_source=at&utm_medium=en .

Small, M. L., Harding, D. J., & Lamont, M. (2010). Reconsidering culture and poverty. The Annals of the American Academy of Political and Social Science, 629 (May), 6–27.

Tumin, M. M. (1953). Some principles of stratification: A critical analysis. American Sociological Review, 18 , 387–393.

Wrong, D. H. (1959). The functional theory of stratification: Some neglected considerations. American Sociological Review, 24 , 772–782.

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What Is Poverty?

Understanding poverty, aspects of poverty, discrimination and poverty, how poverty is measured, how to reduce poverty, the bottom line, what's poverty meaning, causes, and how to measure.

James Chen, CMT is an expert trader, investment adviser, and global market strategist.

Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas' experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.

Investopedia / Laura Porter

The term poverty refers to the state or condition in which people or communities lack the financial resources and essentials for a minimum standard of living . As such, their basic human needs cannot be met. People and families who live in poverty may go without proper housing, clean water, healthy food, and medical attention. Each nation may have its own criteria for determining the poverty line and counting how many of its people live in poverty. Poverty is a socioeconomic condition that is the result of multiple factors—not just income. These factors include race, sexual identity, sexual orientation, and little to no access to education, among others.

Key Takeaways

• Poverty is a state or condition in which a person or community lacks the financial resources and essentials for a minimum standard of living.
• Poverty-stricken people and families might go without proper housing, clean water, healthy food, and medical attention.
• Poverty is an individual concern as well as a broader social problem.
• Welfare programs are used by governments to help alleviate poverty.
• Poverty is the result of multiple factors, not simply income.

Poverty refers to the lack of adequate financial resources such that individuals, households, and entire communities don't have the means to subsist or acquire the basic necessities for a flourishing life. This means being so poor as to struggle to obtain food, clothing, shelter, and medicines.

Poverty is both an individual concern as well as a broader social problem. On the individual or household level, not being able to make ends meet can lead to a range of physical and mental issues. At the societal level, high poverty rates can be a damper on economic growth and be associated with problems like crime, unemployment , urban decay, education, and poor health.

Governments often put social welfare programs in place to help lift individuals, families, and communities out of poverty. Some countries have stronger welfare states (social safety nets) than others. For instance, the U.S. tends to be much more individualistic and shuns welfare programs. European countries, in comparison, have a much broader range of welfare programs and support for those in need.

Poverty in the U.S.

Poverty status in the United States is assigned to people who do not meet a certain income threshold, which is set by the Department of Health and Human Services (HHS) . Poverty rates in the United States, or the percentage of the U.S. population living in poverty, are calculated by the U.S.  Census Bureau .

When measuring poverty, the U.S. Census Bureau excludes the following people:

• Institutionalized people
• People living in military quarters
• People living in college dormitories
• Individuals under the age of 15

According to the latest Census, 37.9 million people in the U.S. lived in poverty in 2021, up from 37.2 million in 2020.

Each year, the Census Bureau updates its poverty threshold statistics. The table below shows the 2022 income thresholds for those in poverty. Each column represents the number of people living in a household under the age of 18.

• In 2022, the poverty income threshold for a family of four with two children under the age of 18 is $29,678 per year.
• In 2022, for two people over age 65 with no children under 18, the poverty threshold comes in at $17,689 per year.
• We can see that the income level for the poverty threshold increases for families with more children under 18.

The poverty thresholds, as well as the number of children under the age of 18 in a home, are important because they help determine how government aid can be allocated, such as food assistance and medical care. The measurement for those in poverty uses pretax income or income before taxes are taken out by the Internal Revenue Service (IRS) .

Global Poverty

Poverty has decreased in developed countries since the Industrial Revolution . Increased production reduced the cost of goods, making them more affordable, while advancements in agriculture increased crop yields , as well as food production.

The international poverty line is a monetary threshold under which an individual is considered to be living in poverty. This figure is calculated by taking the poverty threshold from each country—given the value of the goods needed to sustain one adult—and converting it into U.S. dollars. The current international poverty line is $2.15 per day.

Many people around the globe still struggle to make ends meet. According to the World Bank , an estimated 719 million people lived in extreme poverty—defined as surviving on less than the $2.15 per day line—by the end of 2020.

It's estimated that more than 40% of the world's population lives in poverty, with the United States scoring the highest among developed nations. According to a report from Frontiers, communities of color are more susceptible to poverty because of "racist notions of racial inferiority and frequent denial of the structural forms of racism and classism" globally and within the U.S.

COVID-19 was responsible for plunging roughly 100 million more people into extreme poverty, according to the World Bank.

Poverty and Children

The impact of poverty on children is substantial. Children who grow up in poverty typically suffer from severe and frequent health problems; infants born into poverty have an increased chance of low birth weight, which can lead to physical and mental disabilities.

In certain developing countries, poverty-stricken infants are nine times more likely to die in their first month compared to babies born in high-income countries. Those who live may have hearing and vision problems.

Children in poverty tend to miss more school due to sickness and endure more stress at home. Homelessness is particularly hard on children because they often have little to no access to healthcare and lack proper nutrition, which often results in frequent health issues.

What Causes Poverty?

Poverty is a difficult cycle to break and often passes from one generation to the next. It is often determined by socioeconomic status, ethnicity, gender, and geography. Many people are born into poverty and have little hope of overcoming it. Others may fall into poverty because of negative economic conditions, natural disasters , or surging living costs, as well as drug addiction, depression, and mental health issues.

Access to good schools, healthcare, electricity, clean drinking water, and other critical services remains elusive for many and is often determined by socioeconomic status, gender, ethnicity, and geography. Other root causes of poverty include:

• Limited to no job growth
• Poor infrastructure
• Conflict and war
• High cost of living
• Social barriers
• Lack of government support

For those able to move out of poverty, progress is often temporary. Economic shocks, food insecurity , and climate change threaten their gains and may force them back into poverty.

Typical consequences of poverty include alcohol and substance abuse, little to no access to education, poor housing and living conditions, and increased levels of disease. Heightened poverty is likely to cause increased tensions in society as inequality increases. These issues often lead to rising crime rates in communities affected by poverty.

As noted above, poverty isn't simply related to income levels. In fact, there are a number of factors that can push people into or below the poverty line. Discrimination is just one of those issues. Put simply, people are prevented from living with and enjoying certain rights because of who they are. Here's why.

In some cases, governments may put certain laws and regulations that prevent certain individuals or communities from accessing services, such as healthcare, education, or social services. They may also be denied access to the labor market and/or housing, which can prevent them from reaching a suitable standard of living. In other cases, deep-rooted societal beliefs can isolate individuals, families, and entire communities.

Some of the most common groups of people who may experience this type of discrimination include (but aren't limited to):

• People living with HIV/AIDS
• Black, Indigenous, and People of Color
• Women, including single mothers
• Members of the LGBTQ+ community

According to statistics from the Williams Institute at the UCLA School of Law, poverty rates among members of the LGBTQ+ community have dropped since the COVID-19 pandemic. But rates are still higher than those who don't identify as LGBTQ+. The most recent report showed that:

• 17% of LGBT people in the U.S. lived in poverty in 2021 compared to 12% in non-LGBT communities
• 21% of transgender people lived in poverty in the U.S. in 2021 compared to 20% of cisgender bisexual women
• 26% of LGBT families with children experienced poverty in 2021

The report also indicated that LGBTQ+ people of color—notably, "Black, Latinx/Hispanic, Native Hawaiian/ Pacific Islander (NH/PI), American Indian/Alaskan Native (AI/AN), and Multiracial people"—are more likely to experience poverty compared to White or Asian Americans.

Poverty is commonly measured using income thresholds in many countries, including the United States. Centralized bodies like the Census Bureau collect data and update the information on an annual basis based on inflation . This information, which is reported through the Consumer Price Index for All Urban Consumers (CPI-U) , generally includes income thresholds compiled from different sizes and types of families/households. Each family member in a household that falls under the threshold is considered to be in poverty, according to the Census Bureau.

Certain types of individuals are not included in the count as their level of poverty cannot be determined. These groups include:

• People within certain group settings like prisons and nursing homes
• Individuals living in military barracks
• Those living in college dorms
• People under the age of 15 whose income cannot be determined

Keep in mind that using income thresholds is just one way that countries measure poverty. But there are other ways to determine who lives above and below the poverty line. Some countries may use an absolute figure like the one used by the World Bank. As noted above, the organization determined that people who live below the $2.15-per-day limit are in poverty.

The United Nations and the World Bank are major advocates of reducing world poverty. The World Bank has an ambitious target of reducing poverty to less than 3% of the global population by 2030. Some of the actionable plans to eliminate poverty include the following:

• Installing wells that provide access to clean drinking water
• Educating farmers on how to produce more food
• Constructing shelter for those in need
• Building schools to educate disadvantaged communities
• Providing enhanced access to better healthcare services by building medical clinics and hospitals

For poverty to be eradicated as the World Bank sets out to do, communities, governments, and corporations need to collaborate to implement strategies that improve living conditions for the world’s poor. Among these strategies may include boosting socioeconomic conditions, fighting and eliminating systemic racism, establishing minimum wages that align with the cost of living, providing paid leave, and promoting pay equity among other things.

What Countries Have the Highest Poverty Rates?

The countries with the highest poverty rates include South Sudan (82.30%), Equatorial Guinea (76.80%), Madagascar (70.70%), Guinea Bissau (69.30%), and Eritrea (69.00%).

Which States Have the Highest Poverty Rates?

As of 2023, the states with the highest poverty rates were Mississippi (18.80%), Louisiana (17.40%), New Mexico (16.20%), Arkansas (14.70%), and Alabama (14.60%).

Can Poverty Be Solved?

The answer to this question is complicated and nuanced. If it were easy or obvious, poverty would no longer be such a big issue. Social welfare programs and private philanthropy are ways to provide for those in poverty, along with access to essentials like clean water, good food, and adequate healthcare. However, more is needed. Programs that encourage impoverished individuals to obtain skills, jobs, and education are also important as a longer-term cure.

Poverty is defined as the state or condition where people and communities cannot meet a minimum standard of living because they lack the proper resources . These include (but aren't limited to) financial resources, basic healthcare and education, clean drinking water, and infrastructure. Living in the socioeconomic condition of poverty is a result of multiple factors not simply including race, sexual identity, sexual orientation, and access to education, among others. Organizations like the United Nations and the World Bank, which say that poverty will continue to grow well beyond 2030, urge nations to fight poverty by implementing policies and regulations that can drastically improve the quality of living for all communities.

U.S. Department of Health & Human Services. " Poverty Guidelines ."

U.S. Census Bureau. " Poverty - Surveys & Programs ."

U.S. Census Bureau. " How the Census Bureau Measures Poverty ."

United States Census Bureau. " Income, Poverty and Health Insurance Coverage in the United States: 2021 ."

U.S. Census Bureau. " Income and Poverty in the United States: 2020 ."

U.S. Census Bureau. " Poverty Thresholds ."

U.S. Department of Health & Human Services. " Programs that Use the Poverty Guidelines as a Part of Eligibility Determination ."

The World Bank. " Fact Sheet: An Adjustment to Global Poverty Lines ."

The World Bank. " Global Progress in Reducing Extreme Poverty Grinds to a Halt ."

Frontiers. " Poverty, Racism, and the Public Health Crisis in America ."

The World Bank. " Poverty ."

National Library of Medicine. " Distribution and Determinants of Low Birth Weight in Developing Countries ."

The World Bank. " A Child Under 15 Dies Every Five Seconds Around the World – UN Report ."

UNICEF. " Levels and Trends in Child Mortality ."

UCLA School of Law Williams Institute. " LGBT Poverty in the United States ."

The World Bank. " Ending Extreme Poverty ."

World Population Review. " Poverty Rate by Country 2023 ."

World Population Review. " Poverty Rate by State 2023 ."

• A History of Income Inequality in the United States 1 of 30
• How Education and Training Affect the Economy 2 of 30
• Education vs. Experience: Which One Gets the Job? 3 of 30
• Unemployment Rate by State 4 of 30
• Can a Family Survive on the U.S. Minimum Wage? 5 of 30
• The Economics of Labor Mobility 6 of 30
• Forced Retirement: What it is, How it Works, FAQ 7 of 30
• Predatory Lending: How to Avoid, Examples and Protections 8 of 30
• Unbanked: What It Means, Statistics, Solutions 9 of 30
• Underbanked: What It Is and Who They Are 10 of 30
• Underinsurance: What it is, How it Works, FAQ 11 of 30
• The History of Unions in the United States 12 of 30
• What Is Middle Class Income? Thresholds, Is It Shrinking 13 of 30
• What's Poverty? Meaning, Causes, and How to Measure 14 of 30
• Gini Index Explained and Gini Coefficients Around the World 15 of 30
• Measuring Inequality: Forget Gini, Go with the Palma Ratio Instead 16 of 30
• Lorenz Curve 17 of 30
• What Is the Human Development Index (HDI)? 18 of 30
• What Are the Criticisms of the Human Development Index (HDI)? 19 of 30
• Poverty Trap: Definition, Causes, and Proposed Solutions 20 of 30
• Conflict Theory Definition, Founder, and Examples 21 of 30
• America's Middle Class Is Losing Ground Financially 22 of 30
• Hollowing Out: What It Means, How It Works 23 of 30
• Social Justice Meaning and Main Principles Explained 24 of 30
• Economic Justice: Meaning, Examples of How to Achieve It 25 of 30
• Welfare Economics Explained: Theory, Assumptions, and Criticism 26 of 30
• Egalitarianism: Definition, Ideas, and Types 27 of 30
• The Nordic Model: Pros and Cons 28 of 30
• Equity-Efficiency Tradeoff: Definition, Causes, and Examples 29 of 30
• The Economic Message Behind Martin Luther King Jr.'s 'Dream' Speech 30 of 30

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Poverty and hunger are inextricably linked. Poverty causes hunger, but not every person living in poverty faces chronic hunger. However, almost all people facing chronic hunger are also living in poverty.

Overcoming poverty will require holistic approaches to address the root causes. For example,  globally, millions of people are living with food insecurity and hunger because they simply cannot afford to buy enough food, cannot afford the farming supplies they need to grow enough good food of their own, or live in regions where climate change is affecting a landscapes ability to support viable agriculture. Rural households are typically the most affected by the consequences of poverty and hunger. In addition to causing hunger, poverty limits a rural community’s ability to invest in its own development. Often, rural girls living in poverty will be kept out of school to save money. This contributes to the gender disparity in the education, and between rural and urban girls. The lack of education leads to higher adolescent birth rates which can over-burden an already economically strained community, perpetuating a cycle of gender inequality, poverty, and hunger.

Pulling people out of poverty will not be accomplished through unsustainable and unreliable charity. It will require social justice to ensure basic human rights are met, leaving no one behind, while allowing everyone the opportunity to fulfill their right to a dignified and decent life.  For many counties and societies this will include building the capacity of women and men and may involve skills training, enhanced education, and knowledge mobilization to provide the necessary tools and resource to improve livelihoods and communities to build better futures for themselves and their children.

This assignment will look at food insecurity for a named country. The collected information will be based on a thorough literature review of the issues and pathways for solutions.

• Looking at your own country or a country of interest, assess and report on the food insecurity situation at the national level (what is the status of food security for this country).
• What is the food insecurity situation for this community?
• What are the current strategies being implemented (if any)? What is working and not working?
• What are some strategies and programs you would recommend to help pull this community out of food insecurity?

Introduction to the Sustainable Development Goals (SDGs) Copyright © by Jocelyn Baker is licensed under a Creative Commons Attribution 4.0 International License , except where otherwise noted.

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Household financial literacy and relative poverty: An analysis of the psychology of poverty and market participation

Shanping wang.

1 Business School, Hunan Normal University, Changsha, China

2 School of Mathematics and Statistics, Hunan Normal University, Changsha, China

3 School of Electronic Information, Hunan First Normal University, Changsha, China

Associated Data

The original contributions presented in the study are included in the article/supplementary material, further inquiries can be directed to the corresponding author.

Financial literacy is the significant human capital factor affecting people's ability to obtain financial services. Evaluating the relationship between financial literacy and relative poverty is of great significance to poverty reduction. This study investigated the impacts of financial literacy on relative poverty from the perspective of poverty psychology and market participation using data from the 2017, 2019 China Household Finance Survey (CHFS). The empirical findings showed that financial literacy can alleviate relative household poverty through household participation in entrepreneurial activities, commercial insurance participation and the choice of lending channels. Financial literacy has significant poverty reduction effect on households of continuous operation, reduces the likelihood of exiting operation. Further discussion showed that the poverty reduction effect of financial literacy is more pronounced among households with higher levels of financial literacy, under the age of sixty, low levels of indebtedness and in the eastern region. Our study provides empirical evidence for encouraging market participation and promoting financial literacy and provide valuable recommendations for the policymaker to improve poverty reduction effect in the developing country context.

Introduction

Poverty has been a top social issue in the world, and the 2030 Agenda for Sustainable Development was officially adopted at the United Nations Sustainable Development Summit, where “eradicating poverty in all its forms” is the first of many goals (Tollefson, 2015 ; Li et al., 2016 ). However, the issue of poverty is very complex. With the expansion of the concept and application of poverty academics have gradually shifted from a focus on absolute poverty to relative poverty. Absolute poverty generally refers to a household income is insufficient to maintain minimum subsistence conditions, falling into absolute material deprivation. Unlike absolute poverty, relative poverty refers to people living below the average level of other groups in society. The problem of relative poverty is somewhat complex and dynamic (Wan et al., 2021 ). First, relative poverty is related to the absolute poverty line set by countries and regions. If the poverty line of the World Bank is taken as the standard, China will still have large number of poor people. Second, the development trend of poverty is dynamic. Solving the problem of relative poverty not only focuses on the income of poor groups, but also pays attention to cultivating the endogenous development capacity of poor groups (Capacity Development Group, 2006 ). Therefore, how to continue to effectively promote poverty governance and cultivate the endogenous development motivation of poor households, so that households can sustainably increase their income and get rid of poverty is an important issue for the future governance of poverty.

Financial literacy, which is an important human capital factor, specifically refers to people's comprehensive ability to master the basic economic knowledge and financial concepts to manage and allocate funding resources to achieve household benefits through financial services (Atkinson and Messy, 2011 ). A new financial supply system has been developed through the close combination of Internet communication technologies and financial supply, which improves the breadth of financial coverage and the innovation of financial services goods (Reboul et al., 2021 ). Families with a certain level of financial literacy can obtain development opportunities under the background of digital finance and play a crucial role in the governance of relative poverty. However, according to the survey data, the financial literacy of residents in many countries and regions in the world is generally low. For example, Disney and Gathergood ( 2013 ) found in the UK household survey questionnaire database that the questionnaire contained three questions on simple interest, compound interest and minimum repayment, and the results showed that 11% of the respondents got all the answers wrong and only 30% got all the answers right. Klapper et al. ( 2013 ) found that Russia, as a country with rapid growth in consumer lending, only 41% of the respondents could understand the retaliatory interest, and 46% could answer the simple concept of inflation. Lusardi and Tufano ( 2015 ) used the sample of the United States to suggest that only 1/3 of the respondents have a certain understanding of the calculation of compound interest and the details of the use of credit cards. The Brief Report on Consumer Financial Literacy Survey (2021) published by The People's Bank of China shows that, 1 the financial demand and their financial literacy of Chinese consumers are improving. At the same time, the report points out that residents' expectations of financial investment are also irrational, which is prone to irrational investment behavior. If residents have high financial literacy, they can better understand bank lending policies, insurance services and other related financial services, reducing the cost of financial services (Van Rooij et al., 2011 ). When households have access to certain funds and insurance services, they can smooth consumption, participating in Entrepreneurship and lower poverty risk shocks, thereby alleviating poverty. Therefore, the level of financial literacy is directly related to whether households can grasp the income opportunities brought about, thus having an impact on their current livelihood status. This provides a new idea for solving the problem of relative poverty, which is important to improve the quality of poverty reduction and promote regional sustainable poverty alleviation.

Existing research have investigated and achieved various conclusions on ways to increase household income and alleviate relative poverty. From the macro perspective, existing scholars believe that the “Trickle-down effect” of economic development (Dollar and Kraay, 2002 ; Yang et al., 2021 ), inclusive financial development (Ho and Iyke, 2017 ; Kong and Loubere, 2021 ), labor mobility, land transfer (Carvalho et al., 2016 ; Li et al., 2020 ), infrastructure construction and urbanization (Chen et al., 2019 ; Medeiros et al., 2021 ) and other factors alleviate relative poverty. However, studies have also point that while economic growth can explain the decline in poverty rates, it has poor explanatory power and there is no evidence that such growth can spontaneously reduce incidence of poverty (Kakwani and Pernia, 2000 ). In addition, some studies have emphasized the relationship between financial development and poverty, but the findings have not been consistent (Bolarinwa and Akinbobola, 2021 ). It is worth noting that the above studies analyze the impact of external conditions such as policy implementation and macro environment on relative poverty, ignoring the subjective initiative of poor subjects and failing to consider the role of human capital inherent in poor subjects. Although studies have analyzed poverty alleviation of the poor from human capital factors such as education, health, and work experience (Zon and Muysken, 2001 ; Quinn, 2006 ; Bellemare and Bloem, 2018 ; Liu F. et al., 2021 ), little literature has examined household poverty reduction from the perspective of financial literacy.

Some studies have shown that financial literacy has a certain positive impact on the subjective willingness of actors. On the one hand, households with higher financial literacy can enhance the inclusiveness of inclusive finance (Grohmann et al., 2018 ). For instance, increasing access to banking business and microfinance information can improve the availability of financial services (Hasan et al., 2021 ). There are significant effects on household consumption level and consumption inequality (Dinkova et al., 2021 ; Koomson et al., 2021 ), family members' retirement plans (Lusardi and Olivia, 2007 ), and household entrepreneurial behavior (Zhao and Li, 2021 ). On the other hand, financial literacy has a positive effect on financial behavior, such as asset allocation choices (Lusardi et al., 2013 ), financial market participation (Van Rooij et al., 2011 ; Nguyen and Nguyen, 2020 ), financial decision-making (Guiso and Tullio, 2008 ), investment diversification (Guiso and Jappelli, 1998 ), reduction of over-indebtedness (Lusardi and Peter, 2009 ), and credit demand (Lusardi and Peter, 2009 ; Stango and Jonathan, 2009 ). Therefore, improving the financial literacy of family members in their daily participation in production and business processes can make rational and optimal economic decisions to obtain benefits and reduce the incidence of poverty (Lusardi et al., 2013 ; Emara and Mohieldin, 2020 ). Therefore, one aim of this study is to examine the effect of financial literacy on the relative poverty of households.

Improving household financial literacy and achieving poverty alleviation are the results of a combination of economic decisions. Existing literature has studied the improvement of household financial literacy and absolute poverty alleviation from the perspective of household rationality. It is found that financial literacy has a positive impact on alleviating income poverty and asset poverty in rural households (Xu et al., 2021 ). However, there are also literature showing that households with higher financial literacy have a greater likelihood of increasing leverage through financial instruments and overdraft consumption; if the prices of financial assets falls sharply and the overdraft is too large, they will fall into poverty for a long time (Sarthak and Ashish, 2012 ). Most believe that the poverty reduction effect is generated through the rational asset allocation choices of actors (Shan, 2019 ), but did not consider the cultural factors behind financial behavior, i.e., households living in poverty for a long time, after being influenced by some culture, will generate poverty dependence, conservative risk preferences, information barriers and other psychological perceptions of poverty thus triggering severe financial needs of households and self-inhibiting phenomenon of market participation, thus falling into the poverty trap. Therefore, the second purpose of this study is to analyze the internal mechanism of the influence of financial literacy on relative poverty from the perspective of poverty psychology and planned behavior, test the mediating effect and theoretically expand the understanding of the impact mechanism of relative poverty.

Although previous research had confirmed that financial literacy can contribute to poverty alleviation (Shan, 2019 ; Xu et al., 2021 ), this effect is heterogeneous in different household characteristics and regions. Different household characteristics can have an impact on households' financial market participation (Azeem et al., 2017 ; Decerf, 2017 ). Younger household members are more likely to learn basic financial knowledge, cross the consumption threshold of financial services, and be more receptive to financial services and better able to enjoy the benefits of financial development than older people (Calvin et al., 2018 ). Households with higher indebtedness tend to have higher financing constraints and may engage in more irrational economic behavior, making it difficult for households to get rid of poverty quickly (Sarthak and Ashish, 2012 ). Therefore, the third aim of this study is to explore the heterogeneous effects of financial literacy on relative poverty under different household characteristics and regional development levels.

Compared with the existing literature, three contributions to this analysis can be summarized here. First, taking financial literacy as the main human capital factor affecting households' relative poverty enriches the literature exploring the relationship between the two in empirical studies. Some literature believes that family members with certain financial literacy can rationally allocate assets and produce poverty reduction effect from a rational perspective. However, for households living in poverty for a long time, there is a certain degree of poverty psychological cognition. Whether the improvement of household financial literacy can inhibit the occurrence of relative poverty or not is lack of relevant research. From the perspective of poverty psychology theory, our study constructs a theoretical system of financial literacy poverty reduction, which helps to explain how to improve household financial literacy to alleviate the relative poverty. Second, to reveal the inner mechanism of household financial literacy to alleviate relative poverty. Based on the theories of poverty psychology and financial behavior, we verify the role of micro-mechanisms of household financial market participation in financial literacy poverty reduction, provide new ideas for guiding residents to participate in financial markets and thus alleviate relative poverty. Third, we analyze the heterogeneity of the financial literacy on relative poverty, in different household characteristics and regions, and clarify put the boundaries within which the results of our study are valid. In addition, we also hope that this study can help relevant departments to formulate management countermeasures for enhancing residents' financial literacy and stimulating household residents' financial market participation, achieving new breakthroughs in financial literacy poverty reduction.

The remaining sections of this paper are arranged as follows. Section Theoretical background and hypothesis development presents the theoretical link between financial literacy and relative poverty. Section Methodology discusses the methodology, which includes data sources, measurement of key variables and estimation techniques. Section Empirical results and analyses provides contains the findings and analyses, including baseline regression results, endogeneity treatment and robustness tests. Section Analyses of impact mechanisms presents the analyses of impact mechanism and the further analysis. Section Discussion provides discussion and Section Conclusion presents conclusion.

Theoretical background and hypothesis development

When the family has certain material conditions, there has been a shift in poverty governance from absolute poverty to relative poverty. Absolute poverty is usually defined as the difficulty in obtaining income or necessities to meet the basic survival of a household, and the failure to secure basic needs such as housing, utilities, transport, compulsory education and basic health care, relative poverty is identified by setting a poverty line, i.e., 50 or 60% of the median household income. On the other hand, according to Sen ( 1999 ), the main causes of poverty are The deprivation of the household's power and ability to access benefits. Relative poverty is connoted by the term “moderate poverty”, which refers specifically to the difficulty of the household to reach a socially acceptable level due to a lack of social resources and the ability to develop itself (Wu, 2021 ). In the process of alleviating relative poverty, poverty alleviation efforts should focus on building an anti-poverty path based on the capacity building and resource accumulation of households. Therefore, the governance of relative poverty should also start with improving the viable capacity of households to access economic and social development opportunities and thus escape poverty.

It has been shown that the emotional state, social pressure, and other psychological characteristics of poor groups can influence household economic behavior (Guiso and Paiella, 2008 ; Carvalho et al., 2016 ; Haq et al., 2021 ). The theory is generally explained from two perspectives: the behavioral economics and the poverty psychological. The theory of behavioral economics argues that liquidity constraints or background risks under imperfect formal financial markets are seen as an explanatory theoretical mechanism by which poverty affects economic behavior (Gennetian and Shafir, 2015 ; Key, 2022 ). While the poverty psychological theory argues that chronic poverty states may lead individuals to develop psychological characteristics such as negative affect and stress, resulting in poor groups exhibiting poverty dependence due to a lack of initiative, lack of social responsibility. Psychological trap of poverty is that this psychology of poverty will lead to insufficient household participation in financial markets and is not conducive to poverty alleviation (Haushofer and Fehr, 2014 ; Fu et al., 2020 ). Therefore, this paper argues that financially literate can alleviate relative poverty through household participation in entrepreneurial activities by reducing “Poverty dependence”, household commercial insurance participation by improving “Risk appetite”, and household credit access by breaking down “Information barrier” (see Figure 1 ). Therefore, this paper proposes hypothesis 1:

Mechanism of household financial literacy alleviating relative poverty.

• Hypothesis 1: Financial literacy can alleviate relative poverty.

The poorer groups are less resource endowed and less able to develop themselves, and in the long run tend to develop a negative dependency mentality. Families with high financial literacy will the ability to use their knowledge and skills to make reasonable and effective decisions in management of money and resources, have entrepreneurial skills to circumvent negative dependency (Evans and Jovanovic, 1989 ; Santos et al., 2018 ).

According to the Theory of Planned Behavior, behavioral intention is a direct determinant of behavioral implementation, and individual behavioral attitudes and perceptual behavioral control influence individual behavioral intention at different levels (Yang et al., 2020 ). Entrepreneurial intention is a visual representation of the subjective attitudes of potential entrepreneurs regarding entrepreneurial activities and can effectively predict the probability of entrepreneurial behavior. Therefore, entrepreneurial behavior is subject to entrepreneurial intentions, and subjective norms formed by attitudes about investment, financing and risk management behaviors, perceptual behavioral control and perceptions of support and pressure in the external environment combine to influence their entrepreneurial intentions.

Financial literacy can promote household entrepreneurial activity to alleviate relative poverty through the following pathways. First, financial literacy has an impact on household entrepreneurial activity according to the framework of the theory of planned behavior. Households choose entrepreneurial options based on a direct measure of the benefits, costs, and risks. At the same time, entrepreneurship as a form of risky investment can have a direct exclusionary effect on households with low endogenous developmental dynamics and weak human capital. Therefore, financial literacy has a direct impact on individual financial market participation and allocation decisions to different types of assets, as well as on the overall utility of entrepreneurship, and therefore has a direct impact on entrepreneurial choices and the future entrepreneurial intentions of non-entrepreneurial households. Second, financial literacy releases household demand for credit and alleviates credit constraints. Financial constraints on entrepreneurial activity are the primary constraint on residents' entrepreneurial activity (Karaivanov, 2012 ; Weng et al., 2022 ). Improving financial literacy can help households understand various sources of borrowing information, credit market lending policies, and loan processes, reducing their cognitive biases and increasing their chances of successful borrowing (Akudugu et al., 2009 ; Cude et al., 2020 ), thus increasing their willingness to start a business. Third, it is beneficial for households to have the basic skills and qualities needed to carry out entrepreneurial activities (Oggero et al., 2020 ). Higher financial literacy enables better use of financial instruments and improves the current lack of investment opportunities, thus promoting households' participation in market investments (Van Rooij et al., 2011 ; Yang et al., 2022 ) and willingness to start a business (Rugimbana and Oseifuah, 2010 ; Bilal et al., 2021 ). Thus, by improving financial literacy, households build up long-term human capital, reduce “Poverty dependency” and engage in entrepreneurship to generate sustainable income to alleviate relative poverty. Based on this, this paper proposes the following hypothesis:

• Hypothesis 2: Financial literacy alleviates relative poverty by reducing “Poverty dependency” and promoting household participation in entrepreneurial activities.

Financial literacy includes the ability to use financial information and then use financial literacy to plan financially, arrange for retirement and save and accumulate wealth, and is an important piece of human capital that allows individuals to manage their financial resources effectively. Individuals' financial literacy includes irrational financial behavior, such as “Risk appetite”, depending on their cultural background and work experience. In the processes of social finance, the socio-economic environment in which individuals live is changing, financial information channels are diversifying (Gudmunson and Danes, 2011 ; Liu et al., 2022 ), and risk attitudes are changing, and rational financial decisions and behaviors are being made accordingly (Jappelli and Padula, 2013 ; Yin and Yang, 2022 ). Therefore, financial literacy can improve households' subjective attitudes toward financial products that are “Risk appetite”, improve risk management, and protect against the risks of relative poverty.

Mitigating the occurrence of relative household poverty is not only about enhancing the household's ability to sustainably increase income, but also about defending against the risk of the household falling into poverty in the future (Koomson et al., 2020 ). In general, the larger the risk shock, the greater the likelihood that a household will fall into poverty, i.e., its vulnerability, and the more likely it is to fall into poverty when faced with a risk event. Risk attitude is seen to be an individual attribute that changes over time (Roszkowski and Davey, 2010 ; Baláz, 2021 ). On the one hand, financial literacy can change households' risk attitudes and prevent them from falling into poverty by choosing financial instruments such as insurance and credit for risk protection when facing external risks (Urrea and Maldonado, 2011 ; Kwon and Ban, 2021 ). On the other hand, through information analysis and screening of financial products, increasing social trust (Hansen, 2017 ) and risk-taking capacity (Hong et al., 2020 ), for example, by increasing households' willingness to purchase financial insurance, the insurance mechanism will work to help households diversify their risks when they are covered by insurance and other protection, thus reducing the probability of falling into poverty in the future. Based on this, this paper proposes the following hypothesis:

• Hypothesis 3: Financial literacy alleviates relative poverty by improving “Risk appetite” and promoting household commercial insurance participation.

If households lack understanding of the loan products and lending policies, it will lead to a misunderstanding that they cannot access credit and generate demand for credit (Petrick, 2004 ; Howard, 2015 ), and there is “Information barrier”. If household members are aware of credit policies, it will facilitate their formal credit demand and access to formal credit (Akudugu et al., 2009 ; Pak, 2018 ). With the development of financial markets, households can improve their financial literacy in the process of participating in socio-economic markets, breaking down “Information barrier” and optimizing financial decision-making. Therefore, the importance of financial literacy to household financial behavior is increasingly evident, and the lack of financial literacy can be an important factor in the lack of demand for credit and demand-based credit constraints among households (Sol Murta and Miguel Gama, 2022 ).

This paper argues that improved financial literacy can break down “Information barrier” and facilitate households' access to credit, alleviating the incidence of relative poverty. First, improved financial literacy can help households to increase their understanding of credit market policies and procedures and reduce their cognitive biases, thereby increasing their willingness to borrow from formal financial institutions and their demand for formal credit. Families' understanding of the loan information from various channels will improve their probability of loan success (Sol Murta and Miguel Gama, 2022 ). It allows households to have some funds to avoid falling into poverty in case of external risk shocks or when they undertake their own financial activities. Second, increased levels of financial literacy help households to make better use of financial instruments to improve the current lack of innovation and investment opportunities, for example, households become more active in financial market investments (Van Rooij et al., 2011 ; Yang et al., 2022 ) and households gain a share of income. Thirdly, financial literacy drives household financial accumulation (Lusardi et al., 2017 ; Sekita et al., 2022 ), maintains a good credit history, and thus the availability of formal credit is likely to be better, at the same time, it promotes households' “loan application efforts”, i.e., the more financially literate they are, the more likely they are to apply to formal financial institutions. The higher the financial literacy, the more likely the household is to apply for loans from formal financial institutions, which in turn can protect the household from the risk of poverty arising from investment failure and indebtedness (Jitsuchon, 2001 ; Gathergood, 2012 ), and alleviate relative poverty. Based on this, the following hypothesis is proposed:

• Hypothesis 4: Financial literacy alleviates relative poverty by breaking down “Information barrier” and promoting the availability of formal household credit.

Methodology

Sample and data collection.

This paper uses data from China Household Finance Survey (CHFS) in 2017 and 2019. This survey was developed by Southwestern University of Finance and Economics to create a database to investigate the financial behavior of Chinese households. The data were collected from 29 provinces, 345 cities/counties in 2019. The head of the household, as the respondent, answer the questionnaires including items related to demographic characteristics, assets and liabilities, insurance and social security, household expenditures and income, and views on family, marriage, and community governance. The head of the household is the owner of the property of the house and is the family member who knows the most about the household's financial situation. The database can provide panel data analysis for this article.

The original data was pre-processed as follows. As CHFS survey on “financial literacy” did not cover all households, the sample of households with missing indicators was excluded, deleted the family whose head of household is under the age of 16 and over the age of 80, and the outliers of the sample were subjected to an upper and lower 5% tailing process, resulting in a sample size of 8,735 households after pre-processing.

Variables and measures

Dependent variable: relative poverty.

Absolute poverty and relative poverty are the two most common types of poverty. Absolute poverty is defined as falling into absolute material deprivation because a poor household's total income is insufficient to cover basic survival expenses. It is primarily identified by establishing a minimum income or nutrition standard. However, absolute poverty theory cannot explain the persistence of poverty in developed countries (or regions), resulting in a change in the focus and difficulty of poverty governance from addressing absolute poverty to alleviating relative poverty. Relative poverty is a long-term poverty phenomenon that manifests itself primarily in a state of relative material and living conditions relative to others, and a society with abundant material resources does not eliminate the problem of relative poverty (Decerf, 2017 ).

The successful identification of relatively poor households in academics is still in its early stages and follows two basic paradigms, one from a welfare viewpoint, establishing a percentage of median or average income as the relative poverty level, and the other from a socioeconomic perspective (Ravallion and Chen, 2011 ; Chakravarty et al., 2016 ). The viability perspective of poverty is another relative poverty identification paradigm, which contends that relative poverty criteria should detect whether persons lack the potential to survive and socially integrate (Bourguignon and Atkinson, 2000 ). In Latin American nations such as Mexico and Brazil, relative poverty criteria combine income and multidimensional poverty, taking into consideration the level values of various variables such as income, education, and health. This form of identification is practical, but unlike absolute poverty eradication initiatives that focus on fundamental living stability, relative poverty governance focuses on household upward mobility and the opportunity to develop themselves so that they do not fall into poverty in the future. Based on theory of vulnerability as expected poverty (VEP), some scholars have formulated relative poverty standards from the perspective of poverty risk, which has attracted more and more attention in the field of poverty (Dang et al., 2014 ; Hohberg et al., 2018 ).

Therefore, this article measures relative poverty from two viewpoints. The first measure is to define the relative poverty level at US$3.2 per person per day consumption. In 2018, the World Bank established poverty line criteria for developing countries of $1.9 and 3.2 per person per day consumption, existing studies typically use $1.9 as the absolute poverty line, and this paper uses $3.2 as the relative poverty line for households, and after adjusting for purchasing power parity and CPI, which is RMB 4,260 per capita per year as the relative poverty line. If the surveyed household's per person per day consumption is < $3.2, the variable is set to 1, otherwise, it is set to 0. The second measure is to use the vulnerability to poverty to define the relative poverty. One popular approach considers vulnerability as expected poverty (VEP) proposed by Chaudhuri et al. ( 2002 ), i.e., the probability of a household falling into poverty in a future period. Vulnerability to poverty assesses the possibility that a household's income or level of wellbeing will fall below the poverty line if it experiences a risk shock. This indicator indicates changes in the dynamics of poverty and has significant policy consequences (Azeem et al., 2017 ).

It is worth noting that this paper sets a poverty line for household consumption when calculating poverty vulnerability using VEP 2 and vulnerability cutoff based on the incidence of poverty in the current year. Table 1 reports the statistical results of household poverty and the incidence of vulnerability 3 . As can be seen from the table, although absolute poverty has improved considerably in China, the relative poverty and vulnerability rates are still high.

Descriptive statistics of incidence of poverty and vulnerability to poverty.

Explanatory variable: Financial literacy

Financial literacy is the ability of people to acquire basic economic information and financial ideas, manage and allocate resources in order to attain household income through financial services (Atkinson and Messy, 2011 ). The variable “financial literacy” has primarily been quantified in the literature by using dummy variables for household replies to financial questions in questionnaires, i.e., risk diversification, inflation, interest rate and interest compounding (Klapper et al., 2015 ; Grohmann et al., 2018 ).

This paper uses four questions involving financial knowledge and financial behavior from the Chinese Household Finance Survey (CHFS) to examine respondents' financial literacy. Two dummy variables are constructed for each question. The dummy variable corresponding to the first question is 1 if the respondent is “Extremely concerned”, “Very concerned” or “Generally concerned”, otherwise it is 0. The second and third dummy variables indicate whether the question is answered correctly (if the question is answered correctly, set the variable to 1, otherwise it is 0). The dummy variable corresponding to the fourth question is 1 if the respondent is “Project with high-risk and high-return” or “Project with slightly high-risk and slightly high-return”, otherwise it is 0. We used the iterative principal factor method to conduct factor analysis on the four questions and eight variables to produce the financial literacy indicators used in this paper (Van Rooij et al., 2011 ). Table 2 shows the questions designed in the questionnaire among them.

The questions about financial knowledge and financial behavior to examine the financial literacy of the respondents.

The distribution of the financial literacy index and the correlation between the two sub-dimensions of financial literacy are presented in Figure 2 . It can be concluded that the overall financial literacy index is approximately normally distributed. Although there is some positive correlation between financial knowledge and financial behavior, the correlation coefficient between the former and the latter two is not high (correlation coefficient <0.3).

The distribution of the financial literacy index.

Control variables

Control variables are used in regression analysis to reduce the interference of other factors in estimating the primary causal effect. To analyze the influence of household financial literacy on relative poverty more effectively, the effect of other factors on relative poverty must be removed. We adjust for other factors affecting household relative poverty at three levels based on known research findings, individual characteristics, household characteristics and regional development.

Specifically, firstly, individual characteristics variables, including the gender of the household head (Gender, male = 1, female = 0), age of the household head (Age), years of education of the household head (Edu), and marital status of the household head (Marriage, married = 1, unmarried = 0). Secondly, household characteristics variables, including family scale (Family Scale), health status of household members (Health), dependency ratio (Dependency ratio), proportion of family engaged in agricultural labor (Agricultural), proportion of family engaged in non-agricultural labor (Non-agriculture), household income (Income), household net assets (Net asset), and relationship network (Network). Finally, the paper also controls for regional development variables, regional characteristics (Regional, eastern region = 1, central region = 2, and western region = 3) and regional economic development (Economic). Logarithm the following variables, household income, household net worth, and relationship network. Table 3 reports the results of the descriptive statistics of the variables.

Descriptive statistics of the data used in the estimates.

Estimation strategy

Panel regression models always had the following advantages, which could reduce endogeneity induced by unobservable individual heterogeneity and provide more information about individuals' dynamic behavior (Baloch et al., 2020 ; Gallardo, 2020 ). To analyze that how financial literacy affects the relative poverty of households, we primarily generate the following model in this paper.

First, the panel Probit model is established as follows:

Where, poverty i, t is the variable of relative poverty, if the surveyed household's per person per day consumption is < $3.2, the variable is poverty i, t = 1, otherwise, it is set to 0. finlit i indicating the household financial literacy index, Control i, t would be those who affect the relative poverty but are not related to financial literacy, μ i is individual fixed effects in household, λ t is a period fixed effect, ε i t ~ i i d ( 0 , σ 2 ) is random perturbation term, i is different household ( i = 1, 2,…., 10,846), and t is year ( t = 2017, 2019) and α 0 , α 1 and α 2 being the regression coefficients.

Second, the panel model is established as follows:

Where, vulnerability i, t is the variable of relative poverty, the vulnerability to poverty is measured by drawing on vulnerability as expected poverty (VEP) proposed by Chaudhuri et al. ( 2002 ). See the literature for specific calculation steps (Hohberg et al., 2018 ). finlit i indicating the household financial literacy index, Control i would be those who affect the relative poverty but are not related to financial literacy, μ i is individual fixed effects in household, λ t is a period fixed effect, ϵ i , t ~ i i d ( 0 , σ 2 ) is random perturbation term, i is different household ( i =1, 2,…., 10,846), and t is year ( t = 2017, 2019) and β 0 , β 1 , and β 2 being the regression coefficients.

Empirical results and analyses

Benchmark regression results.

Table 4 shows the results of the benchmark regression of household financial literacy on relative poverty. Considering that there is a certain correlation between financial literacy and variables such as household income, household net assets, and relationship network, columns (1) and (3) in Table 4 report the significant negative marginal effect of financial literacy on household relative poverty when the above control variables are not added, indicating that financial literacy helps to reduce the probability of households experiencing relative poverty. In addition, columns (2) and (4) present the complete estimates with the addition of the above control variables, the marginal effect of the financial literacy index decreases, but remains significantly negative at the 5% level and above. A comparison of the results in Table 4 shows that the significance of the coefficients of the key explanatory variables is relatively stable, and that the effect of financial literacy on relative household poverty remains significant even after controlling for other relevant variables, suggesting that household financial literacy alleviates relative poverty and Hypothesis 1 holds.

Benchmark regression: household financial literacy and relative poverty.

*, **, and *** denote significant at 10, 5, and 1% levels, respectively. The standard errors are reported in parentheses .

Poverty reduction effects of financial literacy in different dimensions

Considered that there may be differences in different dimensions of household financial literacy on relative poverty alleviation, this paper further investigates the impact of household financial literacy sub-dimension dimensions on relative poverty. Firstly, columns (1) and (4) in Table 5 show that the effect of household financial knowledge on relative poverty is significantly negative at the 1% level, in other words, increased financial knowledge helps to reduce the probability of relative poverty among households. Secondly, no significant effect of household financial behavior on alleviating relative poverty is obtained from columns (2) and (5). Finally, in columns (3) and (6) of Table 5 , the effects of household financial knowledge and financial behavior on relative poverty are examined simultaneously. The regression results at this point show that financial knowledge continues to have a significant negative effect, while financial behavior no longer has a significant effect. This suggests that there is some variation in the effect of the different dimensions of the household financial literacy index on relative poverty, with the effect of improving household financial knowledge on relative poverty being more significant than that of financial behavior.

Distinguishing different dimensions: the impact of household financial literacy on relative poverty.

*, **, and *** denote significant at 10, 5, and 1 levels, respectively. The standard errors are reported in parentheses .

Endogeneity issue

In the above analysis, benchmark regression may have endogeneity issue due to reverse causality and omitted variables. On the one hand, threshold effect of financial markets may constrain the participation of poor households in financial markets and affect the “Learning by doing” of financial literacy, while non-poor households have more opportunities to participate in financial services and improve their financial literacy, thus there is an inverse causal relationship. On the other hand, respondents' answers to questions related to financial literacy are subjective and may be biased when administering the questionnaire. To alleviate the endogeneity issue, based on Ellis et al. ( 2017 ) and Sol Murta and Miguel Gama ( 2022 ), this paper used the “average of other households' financial literacy indices in the same community” as an instrumental variable. This is justified because respondents can improve their financial literacy by interacting with other households in the same community, and the financial literacy index of other households in the same community does not directly affect the poverty status of the household. Thus, the instrumental variable satisfies the relevance and exogeneity condition.

Table 6 reports regression results of using the instrumental variable. Column (1) and (2) shows the results of estimation using Two-stage Probit model and instrumental variable. The financial literacy index is an endogenous variable, the one-stage regression F-value and KP rk LM-value confirm that the instrumental variables are appropriate. The marginal effect of the financial literacy index increases after accounting for endogeneity, indicating that not considering endogeneity issues would underestimate the impact of financial literacy. Further, columns (3) and (4) are estimated using 2SLS, and financial literacy significantly reduces relative household poverty, with a smaller regression coefficient than when endogeneity is not considered. To increase the exogeneity of the instrumental variables, column (5) and (6) add community variables, such as community disposable income per capita, share of business and industry households, we obtain largely consistent findings. In summary, instrumental variable estimate results show that household financial literacy still significantly reduces relative poverty, while ignoring the endogeneity issue underestimates the impact of financial literacy.

Estimation results of using the instrumental variable.

**, and *** denote significant at 5% and 1% levels, respectively. The standard errors are reported in parentheses .

Robustness tests

To test the robustness of the benchmark regression results, firstly, the measure of relative poverty was replaced. Robustness tests were conducted using alternative relative poverty lines and vulnerability cutoff. Based on Rippin ( 2016 ), 70% of net income per capita and net household assets are used as the new relative poverty line. At the same time, we use the 50% vulnerability line for the test, and columns (1), (2), and (3) in Table 7 show that the findings obtained remain consistent with the previous ones. Secondly, the measure of financial literacy was replaced. The regression results are estimated using equal weighting method to measure the financial literacy index and the results in columns (4) and (5) indicate that the findings are consistent with those previously obtained. The paper then replaces the sample set 4 . The results in columns (6) and (7) remain unchanged, as the four municipalities are removed from the original sample. Finally, the estimation model is replaced. Given that there is a correlation between poverty and vulnerability, and that vulnerability is usually higher for households in deep poverty, this paper used Bivariate Probit model to test the poverty-reducing effects of financial literacy, and the results in columns (8) and (9) show that the basic findings remain unchanged.

Robustness tests: substitution variables, sample size, and estimation model.

**, and *** denote significant at 5% and 1% levels, respectively .

Analyses of impact mechanisms

Promoting household participation in entrepreneurial activities.

According to Hypothesis 2, financial literacy alleviates relative poverty by eliminating the “Poverty dependency” effect and by promoting household participation in entrepreneurial activities. The mechanism of household participation in entrepreneurship involves two main issues: entrepreneurial activity reduces relative household poverty and financial literacy increases household willingness to start a business. This paper follows this line of thought and extends the analysis in two ways. Firstly, the sample is divided into two groups of poor and non-poor households to discuss the differential impact of financial literacy on entrepreneurship among different types of poor households. Second, dummy variables are set based on household entrepreneurship status to investigate the impact of entrepreneurial persistence on relative poverty and how financial literacy affects household entrepreneurial persistence 5 .

Using the instrumental variable from the previous section and measuring household participation in entrepreneurship based on the CHFS questionnaire “whether the household is involved in business or industry”, the variable is equal to 1 if the respondent answered “Yes” and 0 otherwise if the respondent answered “No”. In this paper, we focus on non-farm entrepreneurship. Table 8 reports the results of the estimation, where column (1) shows that household involvement in entrepreneurship helps to reduce the likelihood of poverty in the household. Columns (2), (3), and (4) show that financial literacy significantly contributes to household participation in entrepreneurship and has a greater positive effect on non-poor households. Further, columns (5) and (6) also yield that household continuation in business can significantly reduce relative poverty, with insignificant effects for initial business and exit from business, while financial literacy can significantly reduce the likelihood of household exit from business. The reason for this may be that the poverty alleviation effect of new business start-up households is insignificant compared to that of continuing households due to the short duration of the business. Exiting households also fail to improve household poverty when they exit the business due to capital, tax burden or poor business performance. In summary, financial literacy can play a positive role in alleviating relative household poverty by promoting household participation in entrepreneurship. On the one hand, financial literacy has a greater impact on promoting entrepreneurship among non-poor households, and on the other hand, financial literacy can significantly reduce the likelihood of households withdrawing from business. Therefore, Hypothesis 2 holds.

Test on the impact mechanism of financial literacy on relative poverty (2SLS estimation).

**, and *** denote significant at 5% and 1% levels, respectively. The standard error of clustering at the provincial level is in parentheses .

Commercial insurance participation

Financial literacy promotes participation in commercial insurance by improving the “Risk appetite”, which protects households from the risk of falling into poverty due to negative shocks. Financial literacy reduces the conservative and risk-averse psychological characteristics of the poor and leads to rational financial decisions, which in turn leads to increased risk tolerance through participation in commercial insurance. According to the CHFS questionnaire “whether the household buys commercial insurance”, the variable is equal to 1 if the respondent answered “Yes” and 0 otherwise if the respondent answered “No”. Using the instrumental variable from the previous section, the results are reported in Table 9 , where columns (1) and (2) indicate that financial literacy significantly contributes to households' willingness to participate in commercial insurance, and that participation in commercial insurance significantly reduces household vulnerability to poverty. Hypothesis 3 holds.

*** denote significant at 1% levels. The standard error of clustering at the provincial level is in parentheses .

The choice of lending channels

The choice of loan channel is also an important factor affecting household poverty. Poor households suffer from cognitive biases due to information barriers. Financial literacy promotes household financial accumulation, maintains good credit, promotes “Loan-seeking efforts”, thus enhances formal credit channel choice. According to the CHFS questionnaire “whether the household choose formal loan channels”, the variable is equal to 1 if the respondent answered “Yes” and 0 otherwise if the respondent answered “No”. Table 9 reports the results of regressions using instrumental variables. Column (3) and (4) shows that financial literacy has a significant positive effect on households' preference for formal loan channels, which in turn reduces household poverty vulnerability. In summary, financial literacy can mitigate household poverty vulnerability by increasing residents' risk resilience, mainly by influencing their choice to participate in formal loan channels. Hypothesis 4 holds.

Further analysis

Robustness tests have been used above to show that financial literacy is indeed an important factor influencing households' relative poverty, and that financial literacy affects relative poverty through the institutional pathways of household participation in entrepreneurship activities, commercial insurance participation and formal loan channels. However, the following questions need further analysis. Firstly, is there a difference in the effect of financial literacy on household poverty reduction by level of financial literacy? Secondly, what are the micro effects of financial literacy on poverty alleviation by factors such as household structure, debt level and regional location? These are all questions that require further analysis.

Grouping of different levels of financial literacy

In this paper, households are divided into low level financial literacy group, medium level financial literacy group, medium high level financial literacy group and high-level financial literacy group according to the financial literacy index to study the impact of different levels of financial literacy of households on vulnerability to poverty. Columns (1)–(4) of Table 10 present the regression results. It suggested that financial literacy in different household groups can significantly reduce household poverty vulnerability at levels above 5%, and that the poverty reduction effect is more pronounced for households with high levels of financial literacy.

Further analysis: different financial literacy groups.

Heterogeneity analysis: Different household characteristics and regional locations

This section presents a heterogeneous analysis of the microeconomic effects of financial literacy in alleviating relative household poverty in terms of household characteristics, debt level and regional location. The results of the heterogeneity analysis regressions are reported in Table 11 .

Heterogeneity analysis: different households characteristics and regional location.

Firstly, based on the grouping of household characteristics, the full sample was divided into two groups according to the criterion of “presence of persons aged 60 years old and over in the household”. The results of the sample regressions are presented in columns (1), (2), (7), and (8) of Table 11 . Except for the insignificant coefficient on financial literacy in column (2), the coefficient on financial literacy in all cases is significant at the 5% level or higher, with a negative sign, suggesting that increased financial literacy is more likely to alleviate the relative poverty of the “under the age of sixty” sample. The possible explanation for this is that the development of digital finance based on the Internet and smartphones has continued to raise the threshold of access to financial services, while older people, who mostly lack the ability to use computers and mobile phones, are more receptive to financial services than younger and middle-aged groups and are better able to enjoy the benefits of financial development.

Secondly, based on the grouping of household debt level, the entire sample was divided into two groups: including households of the low debt level and households of the high debt level, using “whether household debt level is higher than the average level of the community in which the sample is located” as the grouping criterion for measuring the level of household debt. Columns (3), (4), (9), and (10) of Table 11 show the results of the sub-sample regressions based on household indebtedness. The coefficients on financial literacy in columns (4) and (10) are not significant, while the coefficients on financial literacy in columns (3) and (9) are significant at the 1% level with a negative sign, indicating that financial literacy is more likely to reduce poverty among households with low levels of debt. Possible explanations are that groups with higher levels of indebtedness tend to have greater financing constraints, lower household income and a higher risk of households falling into poverty. At the same time, households with high levels of debt are likely to engage in more irrational economic behavior, making it difficult for them to move out of poverty quickly.

Finally, the paper uses “whether the sample household belongs to the eastern province” as the grouping criterion for regional locations, divides the full sample into “eastern region” and “central and western region”. Columns (5), (6), (11), and (12) of Table 11 show the results of the sub-samples regressions based on regional location, where the coefficients of financial literacy are all significantly negative at the 1% level, and the coefficients of the samples of “eastern region” are larger than those of the samples of “central and western region”. The regression analysis suggests that increased financial literacy is more likely to alleviate the relative poverty of households in the eastern region of China.

Financial literacy, an important human capital characteristic for households, is significant for alleviating relative poverty. Based on theories of poverty psychology, behavioral finance and vulnerability as expected poverty (VEP), we used panel model, an instrumental variables model, and the Probit model to investigate the impact of financial literacy on relative poverty. The empirical findings suggest that household financial literacy has the effect of alleviating poverty, which is consistent with previous findings (Xu et al., 2021 ), and the mechanism analysis further shows that financial literacy reduces relative poverty through promoting household participation in entrepreneurial activities, commercial insurance participation, and the choice of lending channels. The reduction poverty effect of financial literacy is more significant for “high levels of financial literacy”, “under the age of sixty”, “low levels of indebtedness”, and “households in the eastern”. Implementing multi-channel financial literacy enhancement programs to effectively improve the scope of household financial literacy, continuously improving the efficiency and quality of the household entrepreneurial environment, and actively promoting the diversification of financial products and innovation in service delivery are policy implications of our findings. The results of this paper have implications for other countries. Detailed analysis are as follows.

First, the results of benchmark regression indicate that household financial literacy can alleviate relative poverty. Unlike earlier studies, this paper seeks to explain the empirical findings using theories of poverty psychology and behavioral finance. Chronic poverty can lead to irrational social cognitive features such as negative emotions, stress, and cognitive biases, as well as the construction of self-reinforcing mechanisms of poverty, it can lead households into the poverty trap (Haushofer and Fehr, 2014 ). Financial literacy might have a positive impact on the subjective initiative of family members. On the one hand, it can encourage households to improve their understanding of basic financial services and work toward achieving benefits for themselves (Grohmann et al., 2018 ; Hasan et al., 2021 ). On the other hand, it can have a positive impact on family members' financial behaviors such as asset allocation decisions, financial decisions, and debt reduction (Lusardi and Peter, 2009 ; Lusardi and Tufano, 2015 ), breaking the psychological trap of poverty and increasing income and self-development capacity to alleviate relative poverty.

Second, focus on the control variables, as for household income, significant strong negative correlations appeared. The growth of the income can decrease the relative poverty, which are identical to the previous conclusions (Luo, 2022 ). Household income can meet the needs of family members for daily life goods, it effectively promotes the accumulation of human capital such as education and labor skills of family members, increases their own development ability, and reduces the incidence of poverty by obtaining a continuous income after participating in social labor (Shan, 2019 ). Household net worth and relationship networks can also alleviate relative poverty, and the building of physical and social capital in the household has a limited effect on preventing poverty but can help to reduce the probability of future poverty (Liu et al., 2019 ). The years of education of the household head, marital status of the household head, health status of household members, proportion of family engaged in non-agricultural labor, and regional economic development show the positive effect on household relative poverty with significance level (Zon and Muysken, 2001 ; Li et al., 2016 ; Azeem et al., 2017 ; Decerf, 2017 ). In compared to earlier research, the relative poverty rate of households is higher when the gender of the household head is male, possibly because men have a higher appetite for risk, increasing the likelihood of future household poverty, and the male do not have better saving habits than women and are weaker in resisting the risk of poverty (Almenberg and Dreber, 2015 ; Bannier and Neubert, 2016 ). Families with larger family size and higher dependency ratio can raise the economic burden on the household (Bellemare and Bloem, 2018 ). Households with a high proportion of agricultural labor may get less income and are more likely to fall into poverty.

Finally, the empirical findings showed that financial literacy can alleviate relative poverty through promoting household participation in entrepreneurial activities, commercial insurance participation, and the choice of lending channels. There are possible reasons for the above results. (1) According to the theory of planned behavior, households with higher financial literacy can actively participate in financial markets and various types of asset allocation and encourage household participation in entrepreneurial activities (Yang et al., 2020 ). Concurrently, improved financial literacy enables households to acquire the fundamental skills and literacy required to engage in entrepreneurial activities, resulting in long-term human capital accumulation (Liu M. et al., 2021 ), and household participation in entrepreneurship generates sustainable income to alleviate relative poverty. (2) According to theory of vulnerability as expected poverty (VEP), alleviating relative household poverty necessitates not just improving the households' ability to stabilize income, but also having the ability to resist future poverty risks. Families with higher financial literacy can change their risk attitudes and choose financial tools like insurance and loans to insulate themselves from external threats and keep their families out of poverty (Koomson et al., 2020 ). Simultaneously, households with higher financial literacy analyze information and evaluate financial products in boosting social trust and risk-taking abilities, as well as household willingness to purchase financial insurance (Kwon and Ban, 2021 ), and when these safeguards are obtained, they assist households in diversify risks and decrease the probability of future poverty. (3) According to Behrman's theoretical analysis of educational returns, financial literacy can influence the “Learning by doing” process of household participation in financial markets (Behrman et al., 2012 ; Lusardi et al., 2017 ), assisting households in understanding credit policies and lending processes in attempt to decrease cognitive biases. This may increase households' propensity to lend from formal financial institutions as well as their demand for formal credit (Rugimbana and Oseifuah, 2010 ; Bilal et al., 2021 ). Meanwhile, financial literacy drives household financial accumulation, maintains a good credit history, increases loan success chances, and with access to certain funds, households are strong enough to withstand the risk of poverty due to shocks from unknown risk factors such as investment failure and debt, alleviating relative poverty.

Financial literacy significantly reduced the relative poverty of households, while financial knowledge had a more significant effect on poverty reduction. Using 2017 and 2019 China Household Finance Survey (CHFS), we analyze some mechanism effects, including that financial literacy alleviates relative poverty.

In this study, we measure the relative poverty of household from both static and dynamic perspectives. Based on The World Bank in 2018 set the poverty line criteria for developing countries, we select $3.2 per person per day of consumption for the relative poverty line. In addition, the vulnerability to poverty is measured by drawing on based on vulnerability as expected poverty (VEP) proposed by Chaudhuri et al. ( 2002 ), which reflected the dynamics of relative poverty. We then used factor analysis method to construct a household financial literacy index (including financial knowledge and financial behavior) based on the CHFS questionnaire. The empirical results show that financial literacy alleviates relative poverty through promoting household participation in entrepreneurial activities, commercial insurance participation and the choice of lending channels.

Further analysis shows that the poverty reduction effect is more pronounced for households with high levels of financial literacy. Financial literacy promotes household participation in business and industry, and continuous operation significantly reduces household relative poverty, while the effects of new operation and exit operation are not significant. The effect of financial literacy on poverty reduction is more pronounced for the households of under the age of sixty, low levels of indebtedness and in the eastern region.

The conclusions of this paper have important policy implications: first, implement a multi-channel financial literacy enhancement program to effectively increase the scope of household financial literacy. Targeting financial education at the elderly and groups with lower educational knowledge, financial literacy can be given full play to poverty reduction by increasing financial literacy education in communities and villages and building comprehensive information service platforms on the internet; enhancing their ability to allocate funds, financial planning, etc. Second, the environment for household entrepreneurship should be continuously improved to enhance the efficiency and quality of entrepreneurship. Financial support should be provided to households with a certain level of financial literacy, combined with tax and fee reductions and other means to increase households' willingness to sustain their businesses and ensure that entrepreneurial activities have a poverty-reducing effect in the long term. Third, focus on the livelihoods of vulnerable households and strengthen their risk management capacity. Improve community and village infrastructure to prevent shocks that lead to widespread exposure of households to vulnerability risks, in addition, actively promote the diversification of financial products and innovation in service delivery methods to provide vulnerable households with basic protection that can withstand certain negative risk shocks.

There are some limitations in this study. First, this study does not use a cross-country sample for empirical analysis. Financial literacy is influenced by tradition culture and educational level, and the level of developing financial literacy differs among countries. Therefore, whether the financial literacy index in this paper is applicable to other countries remains to be studied. Further research using cross-country data for the analysis modifies the bias caused by culture and tradition. Second, we should further select more appropriate instrumental variable. The average financial literacy level and welfare indicators of families will be affected by the level of regional economic development. Especially in urban families, families with similar conditions will choose to live in a community, and the exogenous nature of instrumental variables need further discussion.

Data availability statement

Ethics statement.

Ethical review and approval were not required for the study on human participants in accordance with the local legislation and institutional requirements. Written informed consent for participation was not required for this study in accordance with the national legislation and the institutional requirements.

Author contributions

SW: introduction, discussion, implications, and conclusion. PC: the concept, design, methods, result analysis, and paper writing. SH: editing, revising, proofreading, and language editing. All authors contributed to the article and approved the submitted version.

This research was funded by the National Social Science Fund of China, Grant Numbers: 20STA058 and 18AJY003.

Conflict of interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Publisher's note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

1 www.gov.cn/xinwen/2021-09/23/content_5638786.htm

2 In this paper, we used household consumption level to measure vulnerability to poverty. On the one hand, there are often large measurement errors in income data in micro data survey, and consumption data can more accurately reflect Family Welfare (Deaton, 1989 . On the other hand, using income level to calculate poverty vulnerability is difficult to find control variables, and not controlling income variables will lead to serious endogenous problems.

3 In this paper, we used the three-step feasible generalized least squares (FGLS) to estimate the vulnerability of family poverty, see the literature for specific steps (Chaudhuri et al., 2002 ; Hohberg et al., 2018 ).

4 Municipalities directly under the central government have strong particularity in many aspects, such as strategic positioning, spatial status and economic development. In terms of the theme of this study, previous studies have found that the economy of the four municipalities directly under the central government is relatively developed, employment opportunities are relatively sufficient, and residents' entrepreneurial motivation is inhibited (Huang and Qian, 2008 ). To eliminate the possible impact of the sample of municipalities directly under the central government, this study excludes the sample data of Beijing, Shanghai, Tianjin and Chongqing.

5 According to the contents of the questionnaire CHFS 2017 and 2019, families are divided into: continuous operation (the families surveyed twice in a row participated in industrial and commercial operation), new operation (only participated in operation in 2019) and exit operation (only participated in operation in 2014).

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Resources: Discussions and Assignments

Module 16 assignment: living in poverty.

In this assignment, you will apply things you’ve learned about in this course, particularly this module on work and the economy, to consider what life would be like to budget and live as a parent in a family below the poverty line. After you create a monthly budget with a breakdown of expenses, you’ll write a reflection paper about the experience and its application to the course materials.

STEP 1 : Imagine you are a single parent with two kids, ages 1 and 6 (a first-grader). You work a full-time minimum wage job. Make a bulleted list with all of the categories below and write a paragraph for each, explaining how you would plan for monthly expenses.

• Family: Describe your fictional family. Where specifically do you work? What are your kids names and interests?
• Budget : What is you annual income at the current minimum wage rate? What is your monthly income?
• Housing : Where will your family live? Look up actual apartments or houses using websites like Zillow or Craigslist to find a good place for your family to live. Where is it relation to the place you work?
• Childcare and Education : Look up your new address to find what school your children will attend. What is the school’s rating? Next, you will need to find full-time childcare for your youngest child. Look up prices and options in your area (having family or someone watch him or her voluntarily is not an option in this case). How much will it cost?
• Food : write down everything your family will eat, in detail, for every meal of one day. Estimate the expenses for each of those items. Use this daily information to create a weekly grocery list. Look up prices and write down how much you will need to spend on groceries per month.
• Utilities and phone : If not included in the rent, look up average utility costs in your area to pay for electricity, water, garbage, cable, internet, and phone bills.
• Transportation : How will you get around? Do you have a car payment? If you have a car, include an estimated monthly cost. What will you pay in gas expenses? Or is public transportation a feasible option?
• Others : You’ll need to reserve some funds for needs like diapers, wipes, clothes, toilet paper, toiletries, etc. Look up average needs and costs and include that information here.
• Miscellaneous : What other monthly expenses do you anticipate needing for you or your family?

STEP 2 : Write up an analysis paper between 400-600 words, describing your reactions to this exercise, as well as its sociological implications. Consider the following questions:

• Did anything surprise you about this exercise?
• Do you feel that it is reasonable to live off the minimum wage in America?
• What expenses seemed to be the most burdensome?
• How does this exercise tie in with concepts you learned about in this module? Specifically tie in at least two specific terms or concepts.
• What recommendations would you make for government or economic programs to better aid those in poverty?
• In what ways did this assignment make you think about the current state of the economy and things like welfare programs?
• Assignment: Living in Poverty. Provided by : Lumen Learning. License : CC BY: Attribution

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​Why School Absences Have ‘Exploded’ Almost Everywhere

The pandemic changed families’ lives and the culture of education: “Our relationship with school became optional.”

By Sarah Mervosh and Francesca Paris

Sarah Mervosh reports on K-12 education, and Francesca Paris is a data reporter.

In Anchorage, affluent families set off on ski trips and other lengthy vacations, with the assumption that their children can keep up with schoolwork online.

In a working-class pocket of Michigan, school administrators have tried almost everything, including pajama day, to boost student attendance.

And across the country, students with heightened anxiety are opting to stay home rather than face the classroom.

In the four years since the pandemic closed schools, U.S. education has struggled to recover on a number of fronts, from learning loss , to enrollment , to student behavior .

But perhaps no issue has been as stubborn and pervasive as a sharp increase in student absenteeism, a problem that cuts across demographics and has continued long after schools reopened.

Nationally, an estimated 26 percent of public school students were considered chronically absent last school year, up from 15 percent before the pandemic, according to the most recent data, from 40 states and Washington, D.C., compiled by the conservative-leaning American Enterprise Institute . Chronic absence is typically defined as missing at least 10 percent of the school year, or about 18 days, for any reason.

Source: Upshot analysis of data from Nat Malkus, American Enterprise Institute. Districts are grouped into highest, middle and lowest third.

The increases have occurred in districts big and small, and across income and race. For districts in wealthier areas, chronic absenteeism rates have about doubled, to 19 percent in the 2022-23 school year from 10 percent before the pandemic, a New York Times analysis of the data found.

Poor communities, which started with elevated rates of student absenteeism, are facing an even bigger crisis: Around 32 percent of students in the poorest districts were chronically absent in the 2022-23 school year, up from 19 percent before the pandemic.

Even districts that reopened quickly during the pandemic, in fall 2020, have seen vast increases.

“The problem got worse for everybody in the same proportional way,” said Nat Malkus, a senior fellow at the American Enterprise Institute, who collected and studied the data.

Victoria, Texas reopened schools in August 2020, earlier than many other districts. Even so, student absenteeism in the district has doubled.

Kaylee Greenlee for The New York Times

The trends suggest that something fundamental has shifted in American childhood and the culture of school, in ways that may be long lasting. What was once a deeply ingrained habit — wake up, catch the bus, report to class — is now something far more tenuous.

“Our relationship with school became optional,” said Katie Rosanbalm, a psychologist and associate research professor with the Center for Child and Family Policy at Duke University.

The habit of daily attendance — and many families’ trust — was severed when schools shuttered in spring 2020. Even after schools reopened, things hardly snapped back to normal. Districts offered remote options, required Covid-19 quarantines and relaxed policies around attendance and grading .

Source: Nat Malkus, American Enterprise Institute . Includes districts with at least 1,500 students in 2019. Numbers are rounded. U.S. average is estimated.

Today, student absenteeism is a leading factor hindering the nation’s recovery from pandemic learning losses , educational experts say. Students can’t learn if they aren’t in school. And a rotating cast of absent classmates can negatively affect the achievement of even students who do show up, because teachers must slow down and adjust their approach to keep everyone on track.

“If we don’t address the absenteeism, then all is naught,” said Adam Clark, the superintendent of Mt. Diablo Unified, a socioeconomically and racially diverse district of 29,000 students in Northern California, where he said absenteeism has “exploded” to about 25 percent of students. That’s up from 12 percent before the pandemic.

U.S. students, overall, are not caught up from their pandemic losses. Absenteeism is one key reason.

Why Students Are Missing School

Schools everywhere are scrambling to improve attendance, but the new calculus among families is complex and multifaceted.

At South Anchorage High School in Anchorage, where students are largely white and middle-to-upper income, some families now go on ski trips during the school year, or take advantage of off-peak travel deals to vacation for two weeks in Hawaii, said Sara Miller, a counselor at the school.

For a smaller number of students at the school who qualify for free or reduced-price lunch, the reasons are different, and more intractable. They often have to stay home to care for younger siblings, Ms. Miller said. On days they miss the bus, their parents are busy working or do not have a car to take them to school.

And because teachers are still expected to post class work online, often nothing more than a skeleton version of an assignment, families incorrectly think students are keeping up, Ms. Miller said.

Sara Miller, a counselor at South Anchorage High School for 20 years, now sees more absences from students across the socioeconomic spectrum.

Ash Adams for The New York Times

Across the country, students are staying home when sick , not only with Covid-19, but also with more routine colds and viruses.

And more students are struggling with their mental health, one reason for increased absenteeism in Mason, Ohio, an affluent suburb of Cincinnati, said Tracey Carson, a district spokeswoman. Because many parents can work remotely, their children can also stay home.

For Ashley Cooper, 31, of San Marcos, Texas, the pandemic fractured her trust in an education system that she said left her daughter to learn online, with little support, and then expected her to perform on grade level upon her return. Her daughter, who fell behind in math, has struggled with anxiety ever since, she said.

“There have been days where she’s been absolutely in tears — ‘Can’t do it. Mom, I don’t want to go,’” said Ms. Cooper, who has worked with the nonprofit Communities in Schools to improve her children’s school attendance. But she added, “as a mom, I feel like it’s OK to have a mental health day, to say, ‘I hear you and I listen. You are important.’”

Experts say missing school is both a symptom of pandemic-related challenges, and also a cause. Students who are behind academically may not want to attend, but being absent sets them further back. Anxious students may avoid school, but hiding out can fuel their anxiety.

And schools have also seen a rise in discipline problems since the pandemic, an issue intertwined with absenteeism.

Dr. Rosanbalm, the Duke psychologist, said both absenteeism and behavioral outbursts are examples of the human stress response, now playing out en masse in schools: fight (verbal or physical aggression) or flight (absenteeism).

“If kids are not here, they are not forming relationships,” said Quintin Shepherd, the superintendent in Victoria, Texas.

Quintin Shepherd, the superintendent in Victoria, Texas, first put his focus on student behavior, which he described as a “fire in the kitchen” after schools reopened in August 2020.

The district, which serves a mostly low-income and Hispanic student body of around 13,000, found success with a one-on-one coaching program that teaches coping strategies to the most disruptive students. In some cases, students went from having 20 classroom outbursts per year to fewer than five, Dr. Shepherd said.

But chronic absenteeism is yet to be conquered. About 30 percent of students are chronically absent this year, roughly double the rate before the pandemic.

Dr. Shepherd, who originally hoped student absenteeism would improve naturally with time, has begun to think that it is, in fact, at the root of many issues.

“If kids are not here, they are not forming relationships,” he said. “If they are not forming relationships, we should expect there will be behavior and discipline issues. If they are not here, they will not be academically learning and they will struggle. If they struggle with their coursework, you can expect violent behaviors.”

Teacher absences have also increased since the pandemic, and student absences mean less certainty about which friends and classmates will be there. That can lead to more absenteeism, said Michael A. Gottfried, a professor at the University of Pennsylvania Graduate School of Education. His research has found that when 10 percent of a student’s classmates are absent on a given day, that student is more likely to be absent the following day.

Absent classmates can have a negative impact on the achievement and attendance of even the students who do show up.

Is This the New Normal?

In many ways, the challenge facing schools is one felt more broadly in American society: Have the cultural shifts from the pandemic become permanent?

In the work force, U.S. employees are still working from home at a rate that has remained largely unchanged since late 2022 . Companies have managed to “put the genie back in the bottle” to some extent by requiring a return to office a few days a week, said Nicholas Bloom, an economist at Stanford University who studies remote work. But hybrid office culture, he said, appears here to stay.

Some wonder whether it is time for schools to be more pragmatic.

Lakisha Young, the chief executive of the Oakland REACH, a parent advocacy group that works with low-income families in California, suggested a rigorous online option that students could use in emergencies, such as when a student misses the bus or has to care for a family member. “The goal should be, how do I ensure this kid is educated?” she said.

Relationships with adults at school and other classmates are crucial for attendance.

In the corporate world, companies have found some success appealing to a sense of social responsibility, where colleagues rely on each other to show up on the agreed-upon days.

A similar dynamic may be at play in schools, where experts say strong relationships are critical for attendance.

There is a sense of: “If I don’t show up, would people even miss the fact that I’m not there?” said Charlene M. Russell-Tucker, the commissioner of education in Connecticut.

In her state, a home visit program has yielded positive results , in part by working with families to address the specific reasons a student is missing school, but also by establishing a relationship with a caring adult. Other efforts — such as sending text messages or postcards to parents informing them of the number of accumulated absences — can also be effective.

Regina Murff has worked to re-establish the daily habit of school attendance for her sons, who are 6 and 12.

Sylvia Jarrus for The New York Times

In Ypsilanti, Mich., outside of Ann Arbor, a home visit helped Regina Murff, 44, feel less alone when she was struggling to get her children to school each morning.

After working at a nursing home during the pandemic, and later losing her sister to Covid-19, she said, there were days she found it difficult to get out of bed. Ms. Murff was also more willing to keep her children home when they were sick, for fear of accidentally spreading the virus.

But after a visit from her school district, and starting therapy herself, she has settled into a new routine. She helps her sons, 6 and 12, set out their outfits at night and she wakes up at 6 a.m. to ensure they get on the bus. If they are sick, she said, she knows to call the absence into school. “I’ve done a huge turnaround in my life,” she said.

But bringing about meaningful change for large numbers of students remains slow, difficult work .

Nationally, about 26 percent of students were considered chronically absent last school year, up from 15 percent before the pandemic.

The Ypsilanti school district has tried a bit of everything, said the superintendent, Alena Zachery-Ross. In addition to door knocks, officials are looking for ways to make school more appealing for the district’s 3,800 students, including more than 80 percent who qualify for free or reduced-price lunch. They held themed dress-up days — ’70s day, pajama day — and gave away warm clothes after noticing a dip in attendance during winter months.

“We wondered, is it because you don’t have a coat, you don’t have boots?” said Dr. Zachery-Ross.

Still, absenteeism overall remains higher than it was before the pandemic. “We haven’t seen an answer,” she said.

Data provided by Nat Malkus, with the American Enterprise Institute. The data was originally published on the Return to Learn tracker and used for the report “ Long COVID for Public Schools: Chronic Absenteeism Before and After the Pandemic .”

The analysis for each year includes all districts with available data for that year, weighted by district size. Data are sourced from states, where available, and the U.S. Department of Education and NCES Common Core of Data.

For the 2018-19 school year, data was available for all 50 states and the District of Columbia. For 2022-23, it was available for 40 states and D.C., due to delays in state reporting.

Closure length status is based on the most in-person learning option available. Poverty is measured using the Census Bureau’s Small Area Income and Poverty Estimates. School size and minority population estimates are from NCES CCD.

How absenteeism is measured can vary state by state, which means comparisons across state lines may not be reliable.

An earlier version of this article misnamed a research center at Duke University. It is the Center for Child and Family Policy, not the Center of Child and Family Policy.

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Four Montgomery schools lose Title I money after change in poverty metric

Nine-year-old Leo Kennedy used to struggle with writing.

Then an enrichment teacher at Viers Mill Elementary School in Silver Spring, Md. — where Leo is a fourth-grader — started pushing him more, recounted his mom, Laurel Kennedy. After the teacher gave him C’s, it motivated him to try harder. Leo started writing, and he loved it. Now, his dream is to become a reporter.

But the program that helped Leo discover his love of writing is in jeopardy, now that Viers Mill is losing a federal Title I grant that’s key in paying for the enrichment teacher and other positions. Three other Montgomery County elementary schools are in a similar predicament.

The four campuses are among 58 Montgomery schools participating in the Community Eligibility Provision, another federal program that gives free breakfast and lunch to all students at certain schools with high need. Through it, Montgomery County Public Schools says it is feeding more children than ever at no cost.

But schools participating in the program are no longer collecting applications for free and reduced meals, a metric that the Montgomery schools district has traditionally relied on to measure poverty at schools and dole out Title I money.

Now, there are concerns that the school system’s new methodology doesn’t fully capture how much need is on a campus, and schools that need additional federal funding may not get it. It also comes as the Montgomery County Public Schools is seeing a drop in Title I money overall as its demographics change.

Last school year, about 75 percent of Viers Mill students received free or reduced-price lunch, Montgomery County Public Schools spokesman Chris Cram said. But under the district’s new metric, the poverty level fell to about 65 percent. Under the new estimate, Viers Mill Elementary will lose its Title I status in the fiscal year that starts July 1.

During an October 2022 report , the Maryland Department of Education warned of an “inevitable disparity” for schools participating in the Community Eligibility Provision: “These CEP schools will then intrinsically have a lower FARMs rate than other schools who are not participating in CEP, even if the student population is identical.”

The state’s Department of Education said at the time that it would work on an “alternative income eligibility form” that could capture some of the students that are missing in the data. But while the agency initially promised to create that form by 2023, it isn’t expected to roll out until the 2025-2026 school year.

Poverty calculations are vital to establish which schools qualify for Title I status, a designation that enables campuses to receive extra federal aid. In the Montgomery school system — which has 45 Title I schools in the 2023-2024 school year — the funding has helped establish summer programs and recruit staff.

Census data on an area’s poverty levels is used to determine how much Title I money is distributed to school divisions like Montgomery. The district receives a preliminary allocation of money from the state Department of Education in the spring, Cram said.

Last year, Montgomery received about $52 million to split among schools, but it has not received an estimate for the upcoming fiscal year. However, the school system typically will make its own estimate of potential Title I funding by reviewing census data. This year, with census data from 2022 indicating there were fewer students in poverty in Montgomery, school officials project the division will receive less Title I funding in the coming school year.

With some schools no longer collecting the free and reduced meal applications, the school system used a different method to decide how to distribute its Title I money. The new “direct certification” process uses data from public benefits like the Supplemental Nutrition Assistance Program and Temporary Assistance for Needy Families to estimate the poverty level of a school — a method that follows guidance from the federal government, according to a document issued in February 2022 . The district then ranked schools by amount of need.

That method “changed the ranking of the schools quite drastically,” Peggy Pugh, the Montgomery district’s chief academic officer, said during a February school board meeting. “Some of the schools slipped [in the ranking]. Some of them moved up much faster than we anticipated.”

While a school’s Title I status can change on a year-to-year basis, Pugh said, “this year, we couldn’t predict what happened actually.”

In addition to the changes at Viers Mill, Brookhaven Elementary School in Rockville, Md., went from 72 percent to 66 percent. At Oak View Elementary School in Silver Spring, the number dropped from about 74 percent to 65 percent. But the largest decrease was at Strathmore Elementary School, which went from 73 percent to about 60 percent. Each school lost between about $360,000 to $520,000 to pay for staff and other programs.

On the flip side, six new schools were identified as Title I. Through the method, the poverty level at East Silver Spring Elementary School rose from about 62 percent to about 80 percent. Other schools showing higher need under the new method were S. Christa McAuliffe Elementary School and Waters Landing Elementary School in Germantown, Md.; Benjamin Banneker Middle School in Burtonsville, Md.; Meadow Hall Elementary School in Rockville; and Strawberry Knoll Elementary School in Gaithersburg, Md.

In February, principals at the four schools losing their Title I status started notifying their parent-teacher associations of the change. A letter from Brookhaven Elementary School Principal Xavier Kimber explained that the school would be losing several important learning interventions, including summer school and key staff members.

“This loss brings about several significant implications for our school, staff, and most importantly, our students,” Kimber wrote in his letter.

Parents were perplexed by the switch-up. One of the schools losing funding, Oak View, serves only students in grades three through five. But its feeder school, New Hampshire Estates Elementary — which serves children in between prekindergarten and second grade — kept their Title I status.

“Our numbers haven’t just changed overnight,” said Danielle Ring, a parent of a fifth-grader at Strathmore Elementary School. “They are pretty consistent over what they’ve been for the past few years.” She added that the method the school system uses appears to cut out families who are undocumented, since it relies on public benefits.

Donna Gunning, an assistant state superintendent, said state officials are working on a method that would help districts with schools in the Community Eligibility Provision identify more students who may be in need.

Meanwhile, Montgomery County Public Schools has sought grants to pay for resources provided at the four schools losing their Title I status. “It goes without saying that our focus on equity remains no matter the Title I status of any school,” Cram said.

Parents and students at the schools are wanting to bring more attention to the issue.

This month, third-, fourth- and fifth-graders at Viers Mill Elementary who are part of a local Girl Scouts troop organized a walkout during the school day. The elementary school students called on the school system to keep their teachers and programs.

Leo, the 9-year-old who used to be hesitant to write, decided to cover the rally as his first reporting assignment. The change will probably affect the accelerated math and enhanced reading classes he takes.

“I feel a bit sad that I’m not going to be able to get an education that I’m on level for and stuff, and that some teachers are going to lose their jobs and stuff,” Leo said. “I feel mad because, seriously, MCPS? What did we do?”

Georgia women pushing for eradication of ‘period poverty’

ATLANTA, Ga. (WRDW/WAGT) - A push to remove a 4% tax on menstrual products failed to pass again in the state legislature.

In Georgia, if a product is considered necessary, the legislature could pass a bill making the products tax-exempt, like groceries and prescriptions.

State Sen. Nabilah Islam Parkes carried the bill in the Senate. SB 51 would remove the tax, but it never made it to the Senate floor for a vote. The yearly tax collects $7 to 9 million, less than 0.01% of the state budget.

“The state exempts groceries, sodas and Viagra from the state tax exemption. Why are we not exempting menstrual products? We have elected more women to office and I know most of the women I know, know that we need to pass this bill,” said Islam Parkes.

The National Organization of Women reports the average American woman will pay $18,000 for menstrual products during a lifetime. An added 4% tax adds up to nearly another $1,000 in Georgia.

Sheona Diwakar said a class assignment got her passionate about ending period poverty in her community. She started a nonprofit called Soaring Doves. Instead of a food drive, she hosted a hygiene drive. With the help of her neighbors, she gathered supplies to help 10,000 women.

“Someone said they had to choose between groceries and menstrual products, do I go through this one thing one time a month with dignity or do I not eat,” said Diwakar.

One in five women live in poverty, compared to one in eight men. According to the Alliance for Period Supplies, one in three low-income women report missing school or work because they didn’t have period supplies.

“Here in Georgia, I’d like to see more firm legislation. It’s that one final step to make sure everyone has what they need,” said Diwakar.

Georgia is one of 21 states still taxing period products. Islam Parkes said she’ll present the bill again in 2025.

Georgia women pushing for eradication of ‘period poverty’

ATLANTA, Ga. (WRDW/WAGT) - A push to remove a 4% tax on menstrual products failed to pass again in the state legislature.

In Georgia, if a product is considered necessary, the legislature could pass a bill making the products tax-exempt, like groceries and prescriptions.

State Sen. Nabilah Islam Parkes carried the bill in the Senate. SB 51 would remove the tax, but it never made it to the Senate floor for a vote. The yearly tax collects $7 to 9 million, less than 0.01% of the state budget.

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“The state exempts groceries, sodas and Viagra from the state tax exemption. Why are we not exempting menstrual products? We have elected more women to office and I know most of the women I know, know that we need to pass this bill,” said Islam Parkes.

The National Organization of Women reports the average American woman will pay $18,000 for menstrual products during a lifetime. An added 4% tax adds up to nearly another $1,000 in Georgia.

Sheona Diwakar said a class assignment got her passionate about ending period poverty in her community. She started a nonprofit called Soaring Doves. Instead of a food drive, she hosted a hygiene drive. With the help of her neighbors, she gathered supplies to help 10,000 women.

“Someone said they had to choose between groceries and menstrual products, do I go through this one thing one time a month with dignity or do I not eat,” said Diwakar.

One in five women live in poverty, compared to one in eight men. According to the Alliance for Period Supplies, one in three low-income women report missing school or work because they didn’t have period supplies.

“Here in Georgia, I’d like to see more firm legislation. It’s that one final step to make sure everyone has what they need,” said Diwakar.

Georgia is one of 21 states still taxing period products. Islam Parkes said she’ll present the bill again in 2025.

Copyright 2024 WRDW/WAGT. All rights reserved.

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Encouraged by her family, Lavender Tessmer explored various creative pursuits from a young age, particularly textiles, including knitting and crocheting. When she came to MIT, she figured that working with textiles would remain just a hobby; she never expected them to become integral to her career path.

However, when she interviewed for a research assistant position in Self Assembly Lab , it just so happened that the lab had recently received funding from the Advanced Functional Fabrics of America, one of the manufacturing institutes launched during the Obama administration , for a textile-based project.

Tessmer, now a fifth-year doctoral student in design and computation within the School of Architecture of Planning, took on the project, working with Skylar Tibbits , associate professor of design research, and Caitlin Muller , associate professor in building technology. “At MIT, my interest in textiles really exploded and became the center of everything,” Tessmer says.

While textiles may appear commonplace, the Covid-19 pandemic underscored the need for textile products in safeguarding our general health and safety, particularly through the filtration necessary for masks. Recognizing the importance of manufacturing capabilities for textiles, Tessmer’s research has focused on programming textiles with specific functional properties while also considering the feasibility of large-scale manufacturing of such products.

A nonlinear path to MIT

Tessmer studied music as an undergraduate student at Duquesne University, pursuing a passion that bloomed as a high schooler. One assignment opened her eyes to a different career path: She was told to compare a piece of music to some other artistic medium. Through this assignment, she discovered the world of architecture by underscoring the systematic nature of both disciplines, emphasizing the need for repetition and structure to unleash creativity. “I immediately realized that’s what I want to do,” she says.

Tessmer switched gears and decided to devote the year after college to architecture, instead of auditioning for music ensembles. She says, “I always liked making things, and then, with architecture, I realized that you can make things as part of your profession.” She relied on the basic drafting skills that her father had taught her, and channeled these into building her architecture portfolio.

Ultimately, she decided to pursue a master’s degree in architecture at Washington University in St. Louis. She graduated with her master’s at the end of the 2007 economic recession, a time when jobs in architecture were scarce. She eagerly accepted a part-time role teaching at WashU. Over the next five years, this role evolved into a full-time lecturer role, where she taught students while also independently establishing her own design practice and leading various installation design projects. Fittingly, all of the installations were inspired by textiles. “They were these high-performance carbon-fiber braided structures that we hand-made into large-scale braided nets with specific geometries,” Tessmer explains.

“Squeezing everything” out of graduate school

Teaching at WashU was a great experience, but the practice-oriented nature of the architecture department motivated Tessmer to seek complementary perspectives on design. “I wanted a totally new venue that was supportive of research and pushing the boundaries of design. I wanted to see what other approaches were out there,” she says. As her interests continued to grow in that direction, she learned that MIT has some renowned researchers in the field. She decided to apply for a master’s degree in architecture studies, and ultimately a doctorate in design and computation, within the School of Architecture and Planning.

MIT’s program stood out to Tessmer because of the interdisciplinary approach of the architecture department. She says, “If you are an architect or designer, it is not strange to end up in a class full of people who are not architects, and that’s totally normal and even expected.” The integrated nature of her program is a shift from her previous academic experiences, where each discipline had been distinct and separate. She also values the lack of hierarchy between different disciplines within the architecture department here. “There is respect across disciplines for the contribution from each participant,” she says.

As an older student, Tessmer has a slightly different approach to graduate school, compared to her peers. She says, “MIT is amazing because there is so much variety and so many things that you can get involved in. But my style is to be hyperfocused on my interests. For me, there have been huge benefits to focusing on this specific thing and squeezing everything I can out of it, even in the face of all of these other opportunities.”

Tessmer has devoted herself to several projects throughout grad school, but all share a common thread: an emphasis on fiber development and textile programming. As a master’s student in the Self Assembly Lab, she utilized the inherent properties of materials and optimized their configurations for specific functions by integrating computation into the material itself. “At MIT, I learned a much broader definition of computation,” she says. “For example, in the Self Assembly Lab, we believe that material is a storage format of information and that you can program material to behave in certain ways.”  

The first project Tessmer worked on was designing a fiber that could respond to temperature fluctuations. Another project focused on embedding many different properties within a single fabric, potentially for astronauts. “The human body is so varied in the number of properties that you need to match,” she says. In conjunction with collaborators across multiple MIT departments, she designed a spacesuit sleeve with embedded padding, stretchable areas, a compression gradient, and various sensors. Her third project has focused on embedding shapechange behavior into fabric structures to enhance human comfort or fit, as an alternative to manual tailoring. Finally, in a return to her architectural roots, she is also working on designing a reinforced concrete beam using textiles, a more sustainable solution to building with concrete, which has a significant carbon footprint.

Another crucial aspect of Tessmer’s research is her focus on the feasibility of large-scale manufacturing for a product. She regularly relies on industrial-scale machinery and consults with manufacturing partners. She says, “The way research is being conducted in the lab is a close parallel to how it would be made in real life. The potential for a direct bridge between one and the other is a high priority for me and a constraint that I have tried to layer on to all of my projects.”

Dabbling in entrepreneurship

Tessmer says with a laugh, “My entire hobby [textiles] has now been absorbed into my research. So I am in the market for a new hobby.” For now, that hobby has taken the form of entrepreneurship. She has been exploring the commercialization potential of her technologies, having filed multiple patents and completed the Blueprint program with The Engine Accelerator. She hopes that one day her method for embedding properties in textiles, while also reducing manufacturing process steps, will be used for commercial fabrics.

As an example, she points to shoe manufacturing. “Your shoes are normally an assembly of lots of different materials and lots of different layers. Instead, my proposal to The Engine focused on embedding all of these properties in an automated way, eliminating the need for an extensive assembly process.” Tessmer envisions entrepreneurship as one of her potential future paths.

For the time being, however, she plans to remain in academia. “From the outside, being a professor seems like an unattainable position. However, I keep being surprised at my ability to get to the next level of the academic hierarchy.” She aims to integrate all her past experiences into a future research career, designing textiles within an architectural context, while also weaving in the constraints of manufacturing scalability.

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