4.2 Inequality Flashcards
Absolute poverty
Unable to afford sufficient necessities to maintain life
World nam, defines this as less the $1.90 per day
E.g of high absolute poverty = Congo
Economic development is highly correlated with absolute poverty
Relative poverty
Exists in society’s that are unequal
Refers to people incomes compared to others in the area
Is classed as anyone below 60% of the median income
What is the poverty trap
Affects people on low incomes as it disincentives looking for work/working longer hours as they may lose out on government welfare, may have to make higher national insurance contributions
Causes of Change in poverty
- Poverty is caused by unemployment, lack of skills, health problems and income dependency
- Absolute poverty tends to fall as GDP rises, as long as government is stable and has welfare payments in place
2 main causes: those on higher salaries see larger growth in salaries than those on lower, changes in government spending on welfare or regressive taxation
Why is poverty in the uk growing
Inequality in wage growth, wages of richest are 170 x larger than poorest
De industrialisation has increased the number of service sector jobs which tend to be lower paid
Growth in : underemployment, zero hour contracts, part time/ temporary jobs,
Decline in trade union power
State benefits have decreased
Tax has become more regressive
what does the Lorenz curve show
This shows the cumulative percentage of the population plotted against the cumulative percentage of income that those people have
causes of wealth and income inequality - wages
some workers earn more than others due to: higher educational achievements, ability to work longer hours, or have more in demand skills
those on high incomes will be able to build up a stock of assets which those on lower incomes will not be able to do
causes of wealth and income inequality - wealth levels
someone who already has higher levels of wealth, either through inheritance or savings, is able to build up a larger wealth due to ability to take an larger/riskier investments offering a greater rate of return
causes of wealth and income inequality - chance
Those who bought houses in the right area or bought the right assets will see a huge increase in the price of their assets and hence an increase in their wealth
causes of wealth and income inequality - age
working adults at the peak of their career will be earning more than a young person at the start of their career
causes of wealth and income inequality - between countries
- some countries are held back by natural disasters or climate
- certain social groups may have been excluded and marginalised
- Developed countries tend to favour each other when trading, negotiating
