4.2.1 Absolute and relative poverty Flashcards
What is Absolute (extreme) poverty
How does it differ between countries
When a household does not have sufficient income to sustain even a basic acceptable standard of living/ to meet basic needs
Absolute poverty thresholds will vary between developed and developing countries
Extreme poverty is considered multi-dimensional
What is relative poverty
A level of household income considerably lower than median
UK’s relative poverty line is household income less than 60% less than median income
What is absolute (extreme) poverty looking like now
The percentage of people living in extreme poverty globally fell to a low of 8.6% in 2018 — down from 11% in 2013
However, this is not falling fast enough to meet sustainable development goals
where is a lot of extreme poverty in the world
41 per cent of people in Sub Saharan Africa live on a per capita income of less than $1.90 a day (PPP)
What is shared prosperity focused on by the world bank
defined as when economic growth increases the incomes and consumption of people in the poorest 40 per cent of the population
What are the main causes of absolute (extreme poverty)
- High growth in population vs GDP, leading to low per capita income
- Severe savings gaps
- Poor public services
- Corruption in Government and business
- High levels of debt + interest payment
- Economic shocks - civil wars, natural disasters
- Low formal employment
- Absence of basic property rights
Ways to measure absolute poverty
Percentage of population living below $1.90 a day (PPP)
Percentage of population living below $3.10 a day (PPP)
Ways to measure relative poverty
Gini-Coefficient
Main causes of relative poverty
- Cuts in top income taxes - rich getting richer
- Surging executive pay - relative to other employees
- High inflation in food and energy
- Market failure in education, housing and health
- Decline strength of trade unions
