Urban poverty, deprivation and informal activity

By Matt Burdett, 17 March 2019.

On this page, we look at the incidence of poverty, deprivation and informal activity (housing and industry) in urban areas at varying stages of development.

  • A man sorts through rubbish in Dhaka, Bangladesh, one of the poorest and largest cities on Earth. Source: By the author.

Defining poverty, deprivation and informal activity


Income poverty is when a family’s income fails to meet an established threshold that differs across countries. There are two types of income poverty (UNESCO, 2017):

  • Absolute poverty measures poverty in relation to the amount of money necessary to meet basic needs such as food, clothing, and shelter.
  • Relative poverty defines poverty in relation to the economic status of other members of the society: people are poor if they fall below prevailing standards of living in a given societal context.

Therefore, relative poverty is when the person cannot live a ‘regular’ life in the place where they live. Absolute poverty is when a person cannot meet their basic human needs.

Absolute poverty is frequently stated to be a ‘dollar a day’. This is because it was US$1 per day (per person) in 1996 when the UN introduced the measure. However, the actual value is altered each year by the World Bank to reflect the current cost of the absolute minimum standard of living in countries around the world. In 2018 the value of absolute poverty was US$1.90 (World Bank, 2019).


Deprivation is a difficult term to define and to measure. Deprivation occurs when people do not have the same access to services and consumer items compared to the majority of others in society. Most deprivation measures therefore look at a ‘basket’ of things that would affect a person’s overall ability to participate in society at the same level as the majority of other people. Many countries compile their own deprivation indexes, and the UN produces a Global Multidimensional Poverty Index (MPI) as part of the Human Development Report. The MPI looks at the following factors:

  • The Multidimensional Poverty Index. Source: UNDP, 2018.

However, the MPI does not report data at the urban level – only the national level. Urban deprivation is therefore hard to establish.

Informal activity

“The informal sector refers to those workers who are self employed, or who work for those who are self employed. People who earn a living through self employment in most cases are not on payrolls, and thus are not taxed. Many informal workers do their businesses in unprotected and unsecured places.” (Wage Indicator, 2019).

Informal economic activity is work that is done outside of a formal and regulated framework. The following list includes common features of informal economic activity.

  • Low wage
  • Don’t need formal qualifications, though skills may be useful
  • No holiday or sick pay
  • Pay no taxes
  • Could be fired at any time
  • Can leave at any time
  • Long hours (10-12 per day, or more)
  • Work every day (no more than one day off a week), though this is dependent on the employer
  • No legal protection
  • No pension

This informal economic activity is often linked to the following issues:

  • Informal economy: unregulated and unofficial economic activity; sometimes refers to illegal activity. (Two other terms, ‘shadow economy’ and ‘black economy’, are colloquial synonyms for the informal economy and should not be used in academic writing.)
  • Formal economy: regulated and official economic activity; all legal economic activity.
  • Dual economy: the balance between the formal economy and informal economy.
  • Bazaar economy: informal economy that has some kind of regular work space e.g. a building or market stall.
  • Street economy: informal activity on the street e.g. begging, hawking.

Informal activity can also refer to social issues which are not regulated. This is common with housing in poorer countries, where squatter settlements are a feature of many urban areas. The very poorest people in society are forced to construct their own housing, often on land that is undesirable.

The experience of urban areas in High Income Countries

It could be expected that High Income Countries would have lower levels of urban poverty, deprivation and informal activity for several reasons:

  • Social security: most HIC governments have a social security system which acts as a safety net for the poorest in society, and ensures that everyone has access to basic healthcare, education and income. However, this can be a very low level and although it is likely to prevent absolute poverty, relative poverty is still likely.
  • Pensions: in almost all HICs, there is a social security scheme that ensures older people are given a minimum income.
  • Higher earnings so more personal savings: because people in HICs earn more money overall, they can often save more which means they can cope with periods when they are not working (including illness and retirement).
  • Existing resources (e.g. housing): as HICs usually have a very well developed infrastructure, ‘new’ money that is earned in the current year is not needed for building new resources, so more money is available for day-to-day expenses:
  • Good quality infrastructure: the trade in products takes advantage of strong transport networks, which reduces transport costs and leaves more money available for other things
  • Charitable organisations: if and when people ‘slip through the net’ and find themselves in poverty, there is usually enough wealth in the country for the general population to give to charities which work with homeless people and so on.

These factors mean that urban areas in HICs rarely have significanat problems when compared to LICs. But that doesn’t mean that poverty and deprivation do not exist.

Example of an urban area: New York City, USA

New York City contains some of the world’s wealthiest districts. However, poverty and social deprivation are still common in some parts of the city. The map below shows the distribution of income across the city in 2000. It’s notable how the map appears to follow the mono-centric models such as Burgess and Hoyt, with a high income area in the city centre (the very middle of the map), followed by areas of low income near the CBD, and then higher income towards the edge of the city.

  • A map based on data from the 2000 US Census, showing the percentage of people living in poverty. Source: Mulbraddon, 2007.

The experience of urban areas in Low Income Countries

Low Income Countries may be expected to have higher levels of absolute poverty, deprivation and informal activity because they don’t have a strong state that can afford to provide for all of its citizens, nor do most individuals have strong finances.

One of the most important features of deprivation in LIC urban areas is land tenure. In this context, land tenure refers to the way in which a person has control of their living space:

  • Owner: the person owns the land on which they live
  • Owner with mortgage: the person owns the land, but paid for it with a home loan. If they are forced to repay the loan, they will probably have to sell their home
  • Renter: the person rents the land from the owner
  • Squatter: the person has no ownership nor rights to use the land on which they live. Squatter settlements are often slums as the people do not have rights to ensure water, energy and other supplies

About 900 million people live in slums, and that number rises to 1.6 billion if unregulated settlements of other types (such as informal living on rooftops of existing buildings) are included (Habitat for Humanity GB, n.d.). Meanwhile, the informal economy can be extremely important in LIC cities. The informal economy accounts for over half the world’s employment, and over 90% of small businesses worldwide (ILO, 2019). This is partly because so many people live and work in squatter settlements which are by definition unregulated. In these areas, a cycle cumulative causation links poverty and deprivation and includes informal economic and social activity.

  • A representation of the links between poverty, land tenure and basic services in squatter settlements. Source: By the author.

Example of an urban area: Kibera, in Nairobi, Kenya

Kibera is one of the world’s largest squatter settlements. No-one is quite sure of the population but it is at least 700,000 and may be over 1 million. It is found in the south of Nairobi in Kenya, and has a long history (Fihlani, 2015):

  • Founded in 1899 on a wooded area (Kibera means ‘forest’ in the Nubian language)
  • 2009 census put population at 170,000, other estimates say 800,000, and some up to a million
  • More than 250 hectares (617 acres)
  • Original settlers were Nubian people from Kenyan/Sudanese border
  • Mostly now from Luo, Kikuyu and Luyha communities
  • 50% of residents are unemployed

The problems of Kibera are associated with the lack of a planned infrastructure, which itself arose due to rapid in-migration and natural increase. Poverty is rife, with around half of the population without a job and living on less than US$1 per day, while only 27% of young people attend school and there is a severe lack of toilets (Totaro, 2016). This results in ‘flying toilets’ whereby people defecate in a bag and then throw the bag into the overburdened drainage ditches.

The combination of these problems has been compounded by slum clearance. Regular attempts are made, either by the government or private developers, to move people on. For example, in 2018 around 30,000 homes were destroyed in order to build a road through the area (BBC News, 2018).


BBC News, 2018. Kenya slum demolished to make way for road. https://www.bbc.com/news/world-africa-44931808

Fihlani, 2015. Kenya’s Kibera slum gets a revamp. https://www.bbc.com/news/world-africa-31540911 Accessed 17 March 2019.

Habitat for Humanity GB, n.d.. The World’s Largest Slums. https://www.habitatforhumanity.org.uk/blog/2017/12/the-worlds-largest-slums-dharavi-kibera-khayelitsha-neza/ Accessed 17 March 2019.

ILO [International Labour Organization], 2019. Informal economy. https://www.ilo.org/global/topics/employment-promotion/informal-economy/lang–en/index.htm Accessed 17 March 2019.

Mulbraddon, 2007. New York City Poverty Map. http://visualizingeconomics.com/blog/2007/09/22/new-york-city-poverty-map Accessed 17 March 2019.

Schreibkraft, 2000. Slum Kibera in Nairobi, seen from above. https://commons.wikimedia.org/w/index.php?curid=8837730 Accessed 17 March 2019.

Totaro, 2016. Slumscapes: How the world’s five biggest slums are shaping their futures. https://uk.reuters.com/article/uk-slums-united-nations-world-insight-idUKKBN12H1GK Accessed 17 March 2019.

UNESCO, 2017. Poverty. http://www.unesco.org/new/en/social-and-human-sciences/themes/international-migration/glossary/poverty/ Accessed 17 March 2019.

UNDP, 2018. The 2018 Global Multidimensional Poverty Index (MPI). http://hdr.undp.org/en/2018-MPI Accessed 17 March 2019.

Wage Indicator, 2019. The Informal Sector. https://mywage.com/labour-law/labourlawMalawi/informal-sector Accessed 17 March 2019.

World Bank, 2019. Poverty. https://www.worldbank.org/en/topic/poverty/overview Accessed 17 March 2019.

Urban poverty, deprivation and informal activity: Learning activities


  1. Explain the difference between relative and absolute poverty. [2]
  2. Define the term ‘deprivation’. [2]
  3. Identify four features of the informal economy. [2]
  4. Explain how housing can be a feature of informal activity in urban areas. [1]
  5. Explain why HICs generally have lower levels absolute poverty, deprivation and informal economic activity than LICs. [4]
  6. Describe the distribution of impoverished people across New York City’s metropolitan area. [3]
  7. Explain the link between poverty, deprivation and informal activity in LICs. [4]
  8. Outline the evidence that suggests Kibera suffers from poverty, deprivation and informal activity. [4]

Other tasks

For a city near you, use evidence to suggest whether it has serious problems with poverty, deprivation and informal activity compared to other cities you have studied. You may use anecdotal evidence if you cannot find specific evidence for your city.

Going further

Find out more about problems in different cities. For example, more information about New York City can be found at the following sites: https://gpia-gis.github.io/adv-spring2018/projects/mapping-food-access-in-new-york-city/

© Matthew Burdett, 2019. All rights reserved.

All secondary material on this site is clearly referenced and may be subject to copyright restrictions by the original authors. All original material on this page is subject to copyright.