3.6 Inequality and Redistribution Flashcards
What is the difference between absolute and relative poverty?
Relative applies to those who don’t have enough income to participate fully within society. Absolute means not having enough to buy the basic necessities needed to survive
What is the national measure for inequality
The poverty line which defines as 60% of the median UK household income (e.g. if the median is £100,000), They only earn £60,000) Less than 60%, they are classified as poor.
Does the UK have many children in poverty?
Yes. Proportionate to their population, the UK have many children in poverty compared to other rich countries.
How do the World Bank measure poverty?
Extreme poverty is measured as living on $1.25 a day or less. In 2015, that included 1 billion people.
What is the multidimensional poverty index?
it measures poverty based upon 10 factors which include water, sanitation, health and education, alongside income
What is the Gini coefficient?
Numerical representation of the inequality found by the Lorenz Curve. (Area A/Area A + Area B) The answer will be between 0 and 1
What are 0 and 1 on the Gini coefficient?
0 is complete equality (money is equally shared to everyone)
1 is complete inequality (one person has all the money, everyone else has none)
Define economic growth
The rate of growth of GDP. The economy may be growing but still have many in poverty
Define economic development
Refers to not just the growth of income but to quality of life.
What issues may prevent economic development
- Education will take time to implement
- Governments may not provide welfare benefits
- Tax collection methods may be poor
What is the difference between bilateral and multilateral aid?
Bilateral aid is from an individual country to emerging economies whereas multilateral aid is where international organisations give aid to emerging economies such as the world bank
What’s an NGO
Non-governmental organisation
Water aid, or other charities are given money to help fund projects
What are the 3 main ways developed countries give aid
- Funding infrastructural development
- Improving welfare (anti-malaria kits)
- Natural disaster help
What are the controversial arguments to giving foreign aid?
- Many ask governments to ‘take care of their own’
- a lot of aid has gone to waste due to specific needs not being made
Why is aid good?
- Provides technical know-how to make themselves more productive
- Aid saves lives
- Increased global economic growth
What are the drawbacks to individuals/ families of poverty
- Poor quality housing
- Increased illness/ lower life expectancy
- Limited access to education
- Poor attitude towards life
What are the drawbacks to society of poverty
- Loss of output
- Expensive benefits
- Social problems; teenage pregnancy, drugs, crime
- NHS stretched
What are the drawbacks to businesses of poverty
- Less demand due to low disposable income
- Luxury businesses may lose sales
What are the benefits of poverty to businesses
- Targeted businesses (Poundland) may do well
- Labour intensive production companies may benefit from low wages paid to the those in poverty
What impacts can a higher pay bring?
- Motivated workers, efficiency is improved
- Less waste/absenteeism - lower costs
- Quality of service improved
A decreasing inequality (more equality) what does this mean in a nutshell for the economy
Growth rate increases
What 3 ways can income be re-distributed?
- Foreign aid
- FDI
- Tax and benefits
What’s the difference between income and wealth
Income is the payment for labour and is a flow over a period of time. Whereas, wealth is a stock value based on the monetary value of the assets of a person
Define the poverty trap
The situation when someone would be poorer or not much richer even if they had a job due to decreased benefits.
Name 3 policies that could be implemented to solve the issues with the poverty trap and say what issues they have
- Reducing benefits so more people have to work. However, jobs are hard to find
- Increase the minimum wage. However, unemployment may occur, costs would increase for employers and become less competitive
- Capping maximum benefits. May push families into real hardship.
What are direct and indirect taxation
Direct is the tax you pay on what you earn (corporate, income)
Indirect is tax you pay on what you spend/use (VAT, car)
What are the main functions of tax
- Government revenue needed to pay for many services such as healthcare, education, benefits
- If a progressive system, those who earn more, pay more tax and redistributes income
