• Note: The views expressed here are solely those of the authors and do not necessarily represent those of Maastricht University, the Innocenti Research Centre, UNICEF, or other affiliated institutions. In accordance with the data use agreement of the European Community Household Panel, this paper is based on data analysis performed during the period that the author was employed by Maastricht University. This research has been performed at Maastricht University and has benefitted from financing by the Maastricht Graduate School of Governance, a grant provided by the EuroPanel Users' Network (EPUNet) that financed a research visit to CEPS/INSTEAD (Differdange, Luxembourg) and from a travel grant provided by the Dutch Scientific Organization (NWO) which funded a research visit to the Kennedy School of Government (Cambridge, USA). We thank our colleagues at CEPS/INSTEAD, Kennedy School of Government, National Poverty Institute, Panel Study of Income Dynamics, and the participants in the conferences on “New Directions in the Study of Inequality” (Princeton, April 2006) and the Advanced Academic Update on poverty “A Walk Off Beaten Tracks (Maastricht, November 2007) who have contributed to the progress of this research. We are especially grateful for the constructive suggestions of Emil Tesliuc, Christopher Jencks, Mary Jo Bane, Erzo Luttmer, Gary Sandefur, Timothy Smeeding, Bea Cantillon, and two anonymous referees.

Geranda Notten, Graduate School of Public and International Affairs, University of Ottawa, 55 Laurier East (11148), Ottawa, ON, K1N 6N5, Canada (


Financial poverty indicators assess which people have few financial resources and are thereby at risk of having an unacceptably low living standard. Most countries use one or several “official” poverty indicators, but they typically use either an absolute or a relative benchmark to determine what is unacceptable; absolute benchmarks are based on basic needs or rights while relative benchmarks depend on what is considered to be a “normal” living standard. Applying the absolute U.S. and the relative EU poverty indicators on the U.S. and 15 EU member states, this research shows that it makes sense to use both benchmarks.