If human development is about enlarging choices, poverty means that opportunities and choices most basic to human development are denied. Thus a person is not free to lead a long, healthy, and creative life and is denied access to a decent standard of living, freedom, dignity, self-respect and the respect of others. From a human development perspective, poverty means more than the lack of what is necessary for material well-being.
For policy-makers, the poverty of choices and opportunities is often more relevant than the poverty of income. The poverty of choices focuses on the causes of poverty and leads directly to strategies of empowerment and other actions to enhance opportunities for everyone. Recognising the poverty of choices and opportunities implies that poverty must be addressed in all its dimensions, not income alone.
The Human Development Report 1997 introduced a human poverty index (HPI) in an attempt to bring together in a composite index the different features of deprivation in the quality of life to arrive at an aggregate judgment on the extent of poverty in a community.
Rather than measure poverty by income, the HPI uses indicators of the most basic dimensions of deprivation: a short life, lack of basic education and lack of access to public and private resources. The HPI concentrates on the deprivation in the three essential elements of human life already reflected in the HDI: longevity, knowledge and a decent standard of living. The HPI is derived separately for developing countries (HPI-1) and a group of select high-income OECD countries (HPI-2) to better reflect socio-economic differences and also the widely different measures of deprivation in the two groups.
For the HPI-1, it is measured by the unweighted average of the percentage of the population without access to safe water and the percentage of underweight children for their age. For the HPI-2, the third dimension is measured by the percentage of the population below the income poverty line (50% of median household disposable income).
In addition to the three indicators mentioned above, the HPI-2 also includes social exclusion, which is The fourth dimension of the HPI-2 . It is represented by the rate of long term unemployment. See: Technical note 1 HDR 2007/2008 [5.680 KB] of Human Development Report 2007/2008 for more details on the computation of the HPI.