4.2.1 - absolute and relative poverty

Question 1

What is absolute poverty?

Answer 1

When a person’s continued daily existence is threatened because they have insufficient resources to meet basic needs, usually occurs in developing countries. Economic development is correlated with absolute poverty = the more developed, the fewer people in absolute poverty.

Question 2

What is relative poverty?

Answer 2

Relative poverty exists when a person is poor compared to others within society. Always exists in societies that are unequal.

Question 3

How is absolute poverty measured?

Answer 3

The World Bank set the poverty line at $1.25 a day in 2005 GDP. Now, it is generally defined as anyone living on less than $1.90 a day.

Question 4

How is relative poverty measured in the UK?

Answer 4

Classed as those with an income of less than 60% of median household income (£27,300 in 2017) after deducting household costs. In the UK, 1 in 5 live below the official poverty line with 14 million in relative poverty.

Question 5

What is the poverty line?

Answer 5

The minimum level of income deemed necessary to achieve an adequate standard of living in a given country.

Question 6

What is poverty trap?

Answer 6

Impacts people on low incomes, when tax and benefits system create a disincentive to look for work or work longer hours. If individuals work for longer hours, individuals may lose income due to income tax and NI contributions as well as losing some income-related benefits.

Question 7

What are some causes of changes in levels of poverty?

Answer 7

• changes in the rate of economic growth
• economic development
• FDI
• policies which result in increased trade
• government tax and benefit policies
• changes in asset prices
• changes in employment levels

Question 8

How does GDP impact absolute poverty?

Answer 8

Absolute poverty tends to fall as real GDP increases, as the state is likely to provide benefits for those unable to benefit from the economic growth.

Question 9

What are the two main causes of increased relative poverty?

Answer 9

• when those on higher salaries see larger income growth than those on lower salaries
• changes in government spending and taxation

Question 10

Why is relative poverty growing in the UK?

Answer 10

• growing inequality in wages growth = highest paid jobs have seen wages increase more than those on lower wages
• deindustrialisation has increased the number of service sector jobs that tend to be lower paid
• growth in underemployment, zero hour contracts, part time and temporary jobs = lower wages for workers
• decline of trade unions left many workers unable to bargain for higher wages
• state benefits have fallen in relative value, taxes have become more regressive
• long term and structural unemployment has risen