4.2 Poverty and Inequality Flashcards
What is absolute poverty?
Absolute poverty is when people are unable to afford sufficient necessities to maintain life.
Defined by the UN as severe deprivation of basic human needs, including food, water, sanitation, health, shelter, education, and information.
How does the World Bank define absolute poverty?
Anyone living on less than US$1.90 a day is considered to be living in absolute poverty.
What is the correlation between economic development and absolute poverty?
Economic development tends to be correlated with absolute poverty; developed countries have fewer people in absolute poverty.
What is relative poverty?
Relative poverty is about people’s income compared to others in their area, indicating inequality within a society.
How is relative poverty defined in the UK?
Relative poverty is classed as those with an income of less than 60% of median household income.
What is the median household income threshold for relative poverty in the UK as of 2017?
£27,300 after deducting household costs.
What percentage of people in the UK live below the official poverty line?
One in 5 people in the UK live below the official poverty line.
What is the poverty line?
The poverty line is the minimum level of income deemed necessary to achieve an adequate standard of living in a given country.
What is a poverty trap?
The poverty trap affects people on low incomes, creating a disincentive to look for work or work longer hours.
What are some causes of poverty?
Causes include unemployment, a lack of skills, health problems, and income dependency.
What tends to happen to absolute poverty as GDP increases?
Absolute poverty tends to fall as GDP increases, assuming state support is provided.
What are the main causes of the growth of relative poverty in the UK?
Causes include:
* Higher income growth for those on higher salaries
* Changes in government spending and taxation.
What factors have contributed to the growth of relative poverty in the UK?
Factors include:
* Growing inequality in wage growth
* De-industrialisation
* Growth in underemployment and temporary jobs
* Decline of trade unions
* Falling state benefits
* Rising long-term unemployment.
What is the difference between income and wealth inequality?
Income is a flow of earnings, while wealth is a stock of assets.
What does the Lorenz curve illustrate?
The Lorenz curve shows the cumulative percentage of the population against the cumulative percentage of income, indicating income inequality.
What is the Gini coefficient?
The Gini coefficient is a measure of inequality calculated as A/(A+B), where a larger coefficient indicates more inequality.
List some causes of income inequality within countries.
- Wages differing due to education and demand
- Wealth accumulation through inheritance or savings
- Chance factors like real estate purchases
- Age-related income variations.
What are some causes of wealth inequality between countries?
- Wars, droughts, famines, and earthquakes
- Exclusion of certain social groups
- Favoritism in trade among developed countries.
What does the Kuznets hypothesis suggest about inequality and economic development?
It suggests that inequality increases as a society develops and then decreases through taxation and government spending.
How did Piketty challenge the Kuznets hypothesis?
Piketty argued that inequality rises as a country develops due to the increasing rate of return on capital.
What impact does capitalism have on income inequality?
Capitalism leads to income inequality due to wage differentials based on demand and supply.
Why is a degree of inequality considered necessary in capitalism?
It incentivizes hard work and economic growth; without it, individuals may lack motivation to take risks.
What are the potential problems associated with excessive inequality?
Excessive inequality can lead to issues with efficiency and social justice.
