Poverty and Inequality Flashcards
Absolute poverty
Where people are unable to afford sufficient necessities to maintain life ( under $1.90 a day)
Relative poverty
People’s income against others in their area (UK, income less than 60% of median household income - 1/5 of people)
How else can relative poverty be measured?
By ability to buy normal goods i.e phones and TVs
Poverty Trap
When benefits are too high, creates a disincentive for those on lower incomes to work - people stay in poverty)
Causes of poverty
Unemployment, lack of skills, health issues, income dependency
What is the link between absolute poverty and GDP?
As GDP rises, absolute poverty falls as the state can provide adequate benefits
2 main causes of relative poverty
Higher salaries receive greater income growth, changes in gov. spending and taxation
What can cause a rise in relative poverty in the UK?
De-industrialisation, growth in unemployment (mainly structural), decline of benefits, increase in regressive taxes, decline of trade unions, increased inequality in wage growth
Income inequality
Extent to which income is distributed unevenly
Wealth inequality
Distribution of assets, likely to be greater than income as assets build up value over time
Lorenz curve
Curve measuring levels of inequality, further the curve is from the straight line the greater the inequality
Gini Coefficient
Area under A divided by Area under A-B (closer to 1, more inequality)
How do wages cause wealth/income inequality?
Higher incomes also allow the wealthier to build up assets, so inequality worsens
How do wealth levels cause wealth/income inequality?
Greater wealth, greater risk-taking with investment for a higher rate of return
How does age cause wealth/income inequality?
Younger, less chance to build up assets + wealth
