poverty + inequality Flashcards
what is the distinction between absolute poverty and relative poverty
absolute poverty is lacking basic necessities to survive
relative poverty is being relatively poor compared to the rest of the country
- absolute poverty can decline at the same time relative poverty is increasing
- there may be relative poverty in a country but not necessarily absolute poverty
what are some problems with the concept of relative poverty
- highly subjective
- changes overtime
- cannot easily be used to make international comparisons
what is median income
incomeamount that divides the income distribution/ population into 2 equal groups
- half having income above that amount, half having income below that amount
what is equity and what is equality
equity = fairness in distribution of income
equality = equal distribution of income
what is horizontal equity
equal treatment of equals
-for example, all individuals in the country are taxed the same amount
what is vertical equity
higher income earners in country are taxed more
- progressive tax system
what are the causes of poverty
unemployment
- recession (cyclical)
- structural (those who used to work in a certain industry don’t have transferable skills and cannot access other jobs in economy - no training for these workers, LT unemployment - trapped in poverty)
poor education/skills
poor health + healthcare (limits productivity, low wages, poverty traps)
wage differentials (greater relative poverty)
tax cuts for well offs (relative poverty) - those earning such high incomes gain a benefit and boost in their income = greater divide between rich + poor
subsistence agriculture - raise children to work on farms (developing countries) in dominant agricultural based industries = poverty trap
what is income
a flow concept (money earned by a person over a period of time)
what is wealth
stock of assets a person owns
what is wealth inequality
difference in value of stocks of assets owned by indvs
what is the Gini coefficient
numerical calculation of inequality based on the Lorenz curve with a value of zero = perfect equality (Lorenz curve is the line of perfect equality and there is no section A) and 1 = perfect inequality (last person in society has the entire income in society = no section B)
- close the Gini coefficient is the 0 = more equal the distribution of income
- matches how much distance there is between Lorenz curve and line of perfect equality and how much there should be
what is the Lorenz curve and what are its axis
graphical representation (visual) of income distribution
- cumulative % income at the side
- cumulative % population at the bottom
closer the Lorenz curve is to line of perfect equality = more equal distribution of income
- further Lorenz curve is drawn from line of perfect equality = more of total income being held by small proportion of richest in society
what is the equation for Gini coefficient and what does each mean
section A
over
section A+B
section A = total area between Lorenz curve and line of perfect equality
B = total area beneath Lorenz curve
A+ B = total area beneath line of perfect equality
what are the differentials between income and wealth
age
- older = greater earning potential (skills, experience) = higher wages
education
- more qualifications = greater earning potential of indv
ownership of financial assets - more better off, stronger employer = workers more access to pension (inherited)
ownership of property - extremely wealthy overtime = bigger divide (inherited)
wage differentials - greater = greater inequality in distribution of income
- state gets involved to provide benefits
what are the causes of income inequality + wealth WITHIN countries
- globalisation
- diffs in education, training, skills
- diffs in wage rates in diff occupations
- strength of trade unions
- level of welfare benefits
- unemployment
- progressive tax systems
