3.6.1 Poverty and inequality

Question 1

what is relative poverty

Answer 1

Do not have enough income to participate fully in society in which they live, varies according to standard of living (less than 60% of median incomes)

Question 2

what is absolute poverty

Answer 2

Not having enough income to provide basic necessities and survive, over a long period of time and affects you ability to be well (food, clothing, clean water, shelter) (less than $1.90 a day)

Question 3

what does relative poverty lead to

Answer 3

• Leads to social exclusion: excludes people from the ‘normal’ → what an average person can do in society
• Eg not having a bank account due to homelessness and paying in cash

Question 4

why is the median used to measure relative poverty

Answer 4

Median is used as it gets rid of extreme incomes : these skew data, making average earning alot higher than it actually is

Question 5

what features does absolute poverty have

Answer 5

• Not enough to keep a person physically well and afford necessities like clean water, food, shelter, clothing etc
• MPI: multidimensional poverty index → safe water, sanitation, child mortality, education, health

Question 6

differences between absolute and relative poverty

Answer 6

• Threshold of Absolute poverty is constant but relative poverty threshold changes with income in a country
• Absolute poverty can be eradicated, but relative poverty will always exist in countries with different levels of income

Exam question
- Define and compare
- Absolute and relative data for 2 application marks
- Impact of both on poverty and explain difference in the context of the question

Question 7

people who struggle to get welfare

Answer 7

• Asylum seekers → people without UK citizenship
• Homeless people → less represented are young people, people who have left care, people with mental illness and addiction, ex prisoners and army veterans
• Pensioners → winter fuel budget reduced by labour gov before budget → already has triple lock (goes up by 2.5%, matches inflation, or rise in average earnings)
• Minorities → curriculum barrier, class distinctions, urban vs rural → worsern cultural sensitivities

Question 8

gini coefficient

Answer 8

Calculated from Lorenz curve
- Provides an objective measure of income inequality and ranges from 0 to 1 or 0 to 100
- Closer to 0 = more equal
- UK GINI 0.35 before housing costs and 0.39 after housing costs

• Gini = A/(A+B) → from LC
• Lower GC: northern european countries → inequality policies, developed countries → left leaning gov in the past or now
• Communist countries, Russia and China
• Higher GC → developing countries, subsaharan Africa, Southern America

Question 9

lorenz curve

Answer 9

• Closer to perfect equality (y=x), more equal
• Read X axis cumulatively
• X axis: cumulative % of population
• Y axis: cumulative % of income
• Draw perfect inequality line and label
• Label any drawn curves with years
• Show change over time by arrow from OG to changed curve

Question 10

why is inequality beneficial

Answer 10

• Additional income is an incentive for more training
• Increases economic growth due to increased spending which can decrease absolute poverty
• Reflects talent and effort rewards
• Not true for all workers, without technology and innovation in developing countries, not alot of value can be added

Question 11

why isnt inequality beneficial

Answer 11

• Increases rich poor gap: less spending and gov has to increase welfare spending to support them
• Lack of buying normal goods, less demand for manufacturing, limits economic growth
• Decreased disposable income, decreased AD and economic growth