Absolute and Relative Poverty Flashcards
What are the two types of poverty?
1) Absolute poverty.
2) Relative poverty.
What is absolute poverty?
When a person’s continued daily existence is threatened due to a severe deprecation of basic human needs. Someone in absolute poverty will struggle to afford necessities, such as food, clothing, and shelter.
What is relative poverty?
When an individual has an income below 60% of median incomes (they are poor comparative to others in society).
How is absolute poverty measured?
In 2015, the World Bank set the poverty line at $1.90 a day. Anyone below this is deemed to be in absolute poverty.
How is relative poverty measured?
Relative poverty is measured in comparison with other people in a country, and will vary between countries. E.g., in the EU, anyone below 60% of the median income are classified as in relative poverty.
What are 4 causes of a change in poverty levels?
1) Economic growth.
2) Taxation and wage rates.
3) Government benefits policy.
4) Trade and FDI.
How can economic growth affect poverty levels?
Nations with high rates of GDP per capita have low rates of absolute poverty. Rising GDP leads to rising incomes in most households (in a free market economy).
How can taxation and wage rates affect poverty levels?
Any change in income tax, VAT, or wage rates can influence the proportion of people falling below the 60% median income threshold for relative poverty.
How can government benefits policy affect poverty levels?
Government policy in regards to benefits, social housing, healthcare, etc. will influence how the most vulnerable groups in society are supported.
How can trade and FDI affect poverty levels?
All policies promoting international trade and FDI will lead to economic growth, providing more employment opportunities.
