Inequality Flashcards
Absolute poverty
Absolute poverty is a situation where individuals cannot afford to acquire the basic necessities for a healthy & safe existence
Such as water, food etc
2022, the World Bank defined absolute poverty as anyone who was living on less than $1.90 a day
Relative poverty
Relative poverty is a situation where household income is a certain percentage less than the median household income in the economy
The UK defines relative poverty as households that are living with less than 60% of the median household income
2022 22% of Uk in relative poverty
Has been rising in UK for a while
Changes of absolute poverty
Economic growth
Gov tax and benefit policies, supports most vulnerable groups
Cause of changes in relative poverty
Rising asset prices can decrease relative poverty in households which own their own properties
Trade liberalisation increases potential market size & output in an economy
Leading to demand for labour & a wage rise
This creates additional income which has a multiplier effect & pulls households out of relative poverty
Income inequality
Income inequality refers to the unequal distribution (flow) of income to households i.e rent, wages, interest & profit
Wealth inequality
Wealth inequality refers to differences in the amount of assets that households own
gini coefficient
A value of 0 represents absolute equality (socialism) & 1 represents perfect inequality
Education, Training & Skills
The higher the skill level the higher the level of income. A country with a poor education system will see greater inequality than one with a good education system
Trade Unions
Countries with strong trade union membership tend to have higher levels of income. With low trade union membership, the exploitation of workers through low wages is easier
Benefit system
Countries that provide a range of benefits (such as unemployment, disability, child support, housing support etc) raise the income of the lowest 20% of the population resulting in more equal distribution
Pension payments
State pension payments ensure a minimum standard of living for retirees resulting in a more equal distribution of income. Countries without it have a much higher percentage of pensioners living in poverty
Wage Rates
(How to improve equality)
The purpose of a national minimum wage is to improve the equity in the distribution of income. Without it, more households would be earning less & inequality would increase
Employment Legislation
(Solution to inequality)
Generally, the more workers are protected by law, the better the income distribution in an economy e.g. maternity benefits ensure that new mothers have a higher level of income during the first months of leave after a birth
Tax Structure
Progressive tax systems allow all income earners to contribute to public revenue according to their ability. Decreasing taxes on the lower end & increasing it on the upper end would mean that the system is more progressive & there would be a more equal distribution of income
Asset Ownership
Assets generate income. The more equal the asset ownership in an economy the less the inequality in income distribution. This was one reason why the UK government changed the law in 1980 allowing council house tenants the right to buy their property at a discounted rate. It is also a reason for the current shared ownership scheme
