LS10/11 - Poverty and Inequality Flashcards
Absolute poverty
Where household income is below a level to maintain basic living standards - food shelter housing
Relative poverty
Where household income is a certain % below median income (50-60% below) - struggle to afford amenities such as broadband, eating out etc
Income
Flow of money derived form factors of production - rent or wages
Wealth
Total amount of assets person owns
Assets
Anything with a market value that can generate income
How are wealth and income mutually reinforcing?
As people earn more income, they can buy more assets (property, equity), improving their wealth, and vice versa.
Wealth inequality
Unequal distribution of assets such as property and savings
Income inequality
Uneven distribution of incomes from wages rent and profit
Measures of inequality
Lorenz curve (bigger gap - more unequal)
Gini coefficient (1 being unequal, 0 being equal)
Causes of poverty
Minimum wages, prevalence of low skilled jobs, natural disasters, education/skills, corruption, economic development, government policies (tax, benefits), primary product dependency, wage growth, war
Causes of inequality
Age, education, state benefits and tax progressivity, assets (property and financial
Why would someone who is older more likely to earn more income and hold more wealth than a younger person?
Higher knowledge, skills and experience allow them to demand higher incomes and work at higher positions. Also they would’ve had more time to accumulate wealth from the income
Why is education a cause of inequality?
Low level of education leads to low skilled, low paying jobs, increasing poverty and inequality while people with high level of education can earn more income. Low income households cannot afford higher education for their children, so cycle continues and gap widens over time
Why does level of state benefits affect inequality?
It provides a source of income to those who are poor, or unemployed. Benefits are funded by taxing richer individuals, distributing income more equally.
Why does tax progressivity affect inequality?
Wealthier individuals pay higher proportion of their income compared to lower income individuals. Higher tax progressivity leads to more equal distribution of income.
