Absolute and Relative Poverty

Question 1

What is absolute poverty

Answer 1

When a household does not have sufficient income to sustain even a basic acceptable standard of living to meet peoples basic needs

Question 2

What are the two extreme poverty lines

Answer 2

Percentage of population living below $1.90 a day at PPP

Percentage of population living below $3.10 a day at PPP

Question 3

What is Relative Poverty

Answer 3

A level of household income considerably lower than the median level of income within a country

Question 4

What is the official UK relative poverty line

Answer 4

Household disposable income of less than 60% of median income

Question 5

State of extreme poverty according to world bank

Answer 5

Extreme poverty is declining but not quickly enough to meet the sustainable development of goals of lowering absolute poverty to less than 3% of the global population

Question 6

Main causes of absolute poverty

Answer 6

Population growing faster than GDP in low income countries leading to lower per capita incomes.

A severe household savings gap – with many families unable to save and living on less than $1.90 per day.

Absence of basic government / public services such as education and universal health care

Effects of endemic corruption in government and business.

High levels of debt and having to pay high interest rates on loans

Damaging effects of civil wars and natural disasters leading to huge displacements of population

Low rates of formal employment, many people in vulnerable/insecure jobs and earning poverty wages

Absence of basic property rights which for example constrains ability to own land, claim welfare.

Question 7

What is relative poverty

Answer 7

Income and consumption are sewed across households, communities and regions

Question 8

Main causes of relative poverty include

Answer 8

Cuts in top rate income taxes in many countries increasing disposable incomes of richer households

Surging executive pay and high rewards for skilled workers compared to other employees

Regressive effects of higher food and energy prices on poorer households

Deep market failures in access to and affordability of good quality education, health & basic housing

Declining strength of trade unions in many countries and the rising monopsony power of some big employers

Question 9

What is the Multi-Dimensional Poverty Index

Answer 9

UN index to see if progress is being made against sustainable development standards to lower the vulnerability of people in emerging and developing countries to severe deprivation

Question 10

What are the measures of inequality

Answer 10

Quintile Ratio
Palma Ratio
Gini Coefficient

Question 11

What is the Quintile Ratio

Answer 11

Ratio of the average income of the richest 20% of the population to the average income of the poorest 20% of the population

Question 12

What is the Palma Ratio

Answer 12

Ratio of the richest 10% of the population’s share of gross national income divided by the poorest 40%’s share

Question 13

What is the Gini Coefficient

Answer 13

A Gini index of 0 represents perfect equality while an index of 100 implies perfect inequality

Question 14

What is the Lorenz Curve

Answer 14

A curve that gives a visual interpretation of income or wealth inequality

Question 15

Causes of income and wealth inequality within countries

Answer 15

Big difference in wages and earnings in different jobs/occupations

Wage differentials due to demand and supply side factors

Effects of unemployment especially among the long term unemployed and younger workers

Damaging effects of poor health and nutrition on employment opportunities and productivity

Changes in the taxation of income and wealth

Question 16

Causes of income and wealth inequality between countries

Answer 16

Low life expectancy and fewer years of healthy life expectancy

Low school enrolment rates as families cannot afford education

Low access to basic health care and poor nutrition which impairs brain development

Vulnerability to loan sharks for families mired in debt

Limited access to affordable technologies

Much lower productivity which then leads to lower wages

Low real spending power limits the size of domestic markets for goods and services

Low prices for primary commodities

Question 17

What does the Kuznets Inequality Curve suggest

Answer 17

That inequality often rises during a phase of rapid industrialisation and urbanisation but there may be a point where increased state welfare provision, progressive income and wealth taxes and more balanced income growth across industries might lead to a fall in overall inequality at higher per capita incomes