Poverty falling sharply in three decades
Poverty in Portugal has decreased significantly over the last three decades. Although the official at-risk-of-poverty rate continues to indicate that a relevant portion of the population lives with reduced income, a long-term analysis shows that living standards have improved substantially.
According to data from the National Statistics Institute (INE), the risk of poverty rate after social transfers rose from 23% in 1994 to 15.4% in 2024. At first glance, this reduction appears relatively moderate. However, it is important to understand how this indicator is calculated.
The risk of poverty rate uses a relative criterion: anyone with an income below 60% of the median equivalent disposable income of society is considered to be at risk of poverty. This means that the poverty threshold is not fixed. On the contrary, it increases as the population’s income increases.
For this reason, this indicator mainly measures relative poverty, that is, the distance of certain groups compared to society’s typical income at each moment. Even if all incomes increase significantly, there will still be a percentage of the population below the defined threshold.
When a different approach is used — keeping the 1994 poverty threshold and updating it only for inflation to current prices — the result is quite different. In this case, the percentage of Portuguese people with incomes below this level would currently be less than 4%.
This means that the overwhelming majority of people who, in 2024, are classified as being at risk of poverty still have an income and consumption level higher than what was considered the poverty threshold three decades ago. In absolute terms, living standards have improved significantly.
The two indicators are not contradictory; measure different realities. The official risk of poverty rate makes it possible to assess relative inequality and identify who is furthest from society’s median income. Comparison with a fixed threshold over time helps to understand the evolution of purchasing power and material living conditions.
Therefore, to fully understand the country’s social and economic evolution, it is useful to look at both perspectives. While relative poverty continues to affect a part of the population, poverty measured by material standards comparable to those of three decades ago has registered a much steeper reduction, reflecting the economic progress achieved by Portugal since the 1990s.
- Facts viewed through a magnifying glass by André Pinção Lucas e Juliano Ventura – A partnership between POSTAL and the Institute
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