4.2.1 Absolute and relative poverty Flashcards
Absolute poverty
When people are unable to afford sufficient necessities to maintain life.
- The UN defines absolute poverty as ‘a condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information.
- The World Bank defines anyone living on less than US$1.90 a day as living in absolute poverty.
● Economic development tends to be correlated with absolute poverty- the more developed a country, the fewer people in absolute poverty. In developed countries, the government tends to intervene to attempt to provide the necessities.
Relative poverty
People’s income in comparison to others in the area. Someone is said to be in relative poverty if their income falls below an average income threshold for the economy; they are at the bottom end of the income scale. (This is a bigger issue in the UK, it will always exist in a society that is not completely equal.)
- ● In Britain, relative poverty is classed as those with an income of less than 60% of median household income (£27,300 in 2017) after deducting household costs. One in 5 people in the UK live below the official poverty line, with 14m people in relative poverty.
● Another way of defining relative poverty is those who cannot afford to buy goods which they need to buy in order to not be considered poor according to social norms, for example an electric fridge or mobile phone.
Poverty line and trap
- The poverty line is the minimum level of income deemed necessary to achieve an adequate standard of living in a given country.
- The poverty trap affects people on low incomes, when the tax and benefits system creates a disincentive to look for work or work for longer hours.
By working longer hours, individuals may find they lose income due to income tax and national insurance contributions as well as losing some income-related state benefits.
Absolute poverty measures
World Bank: The World Bank defines anyone living on less than US$1.90 a day as living in absolute poverty
Relatively poverty measures
UK: In Britain, relative poverty is classed as those with an income of less than 60% of median household income (£27,300 in 2017) after deducting household costs. One in 5 people in the UK live below the official poverty line, with 14m people in relative poverty.
Poverty causes
Poverty is caused by unemployment, a lack of skills, health problems and income dependency.
Causes of changes in absolute poverty
Absolute poverty tends to fall as GDP increases, assuming that the state provides support to those who are unable to benefit from a growing economy.
Causes of changes in relative poverty
The two main causes of growth of relative poverty are:
1) if those on higher salaries see larger income growth than those on lower salaries
2) changes in government spending and taxation
Reasons relative poverty has been growing in UK
o There has been growing inequality in wages growth, with the highest paid jobs seeing their wages increase higher than those on lower wages. Those in the public sector have had low wage increases and several years of falling real wages, due to the policy of austerity. The wages of the richest are now
170 times the average worker, compared to 60 times before.
o De-industrialisation has increased the number of service sector jobs which
tend to be lower paid.
o There has been a growth in underemployment, zero-hour contracts,
part-time jobs and temporary jobs, all of which mean lower wages for
workers.
o The decline of trade unions has left many workers unable to bargain for
higher wages.
o On top of this, state benefits have fallen in relative value whilst taxes have
become more regressive.
o Moreover, long term and structural unemployment has risen.
Poverty and Inequality - Synoptic point **
Links strongly to microeconomics since it looks at the impact on individuals. It relates to the Labour markets unit in theme 3, because of the importance of wage differentials in poverty and inequality.
