Poverty and Inequality Flashcards
Absolute Poverty
When someone can’t afford basic necessities, minimum income needed is the poverty line
what is the poverty line income
1.90 USD per day
Relative poverty
low income relative to others in the country, 50% less than the average income
Poverty trap
when those in poverty earn higher wages they pay more tax and receive less benefits so their wage increase isn’t beneficial and sometimes is even disadvantageous
Causes of changes in absolute and relative poverty
- increase income inequality can increase relative poverty
- Growth can reduce poverty
- rapid pop growth can lead to absolute poverty
- progressive taxation helps with relative poverty
- social welfare and benefit programs
- foreign aid can help to reduce poverty
causes of poverty
- unemployment
- low wages
- low state benefits
- personal debt
- poor education
Government policies to reduce poverty levels
- Benefits can redistribute income
- state provision of healthcare or education
- progressive taxation helps with vertical equity
- economic growth can create more jobs and higher wages
- NMW reduce poverty among lowest paid workers and create incentive to work
income inequality
inequality in the amount of income received
wealth inequality
inequality in the value of assets
causes of wealth and income inequality within countries
- people earn different wages
- Those with already high levels of wealth may only increase
- older people will have higher incomes and more wealth
- chance in buying the right asset
why is wealth more unevenly distributed than income
assets aren’t taxed and can’t be redistributed, and wealth can increase in value and generate more wealth like a share increasing in value
causes of wealth and income inequality between countries
All countries are different levels of developed and some have been impacted more by wars and famines that impact wealth
Kuznet hypothesis
As society industrialises inequality increases as industrial workers wages rise faster than farmers and then income can be redistributed by the gov
How did pikkety disagree with kuznet
inequality continues to rise with industrialisation as the rich only get richer
How is capitalism significant in worsening inequality
- wages vary greatly from job to job
- ## Individual ownership of resources so people have more personal wealth
What is the relationship between inequality and capitalism
Inequality is necessary for capitalism to function as the prospect of higher wages or more wealth creates harder work or entrepreneurship and innovation
what is the x and y axis for the Lorenz curve
X axis - cumulative percentage of the population
Y axis - cumulative percentage of income
What does the diagonal line on the Lorenz curve show
complete equality so 20% of the population would have 20% of the income
How does the Lorenz curve show greater inequality
the further away it curves from the diagonal as it shows larger % of pop holding a smaller % of income in the country
Gini coefficient formula
area A / area A + area B
What is area a and b on the Lorenz curve
area A - between the curve and the diagonal
area B - between the curve and the corner of the graph
what does mini coefficient of 1 and 0 represent
0 = complete equality
1 = complete inequality
gini coeffecient in UK in 1979 and 2019
0.27 and 0.33
