Week 20

Question 1

Poverty definition

Answer 1

individual/household considered extremely poor if they’re perceived to have insufficient funds to meet their basic life sustaining needs and wants

Question 2

what are the 2 types of poverty

Answer 2

• absolute poverty
• relative poverty

Question 3

absolute poverty definition

Answer 3

individual/household that earns an income below minimum income standard and what is required to meet their basic human needs

e.g food, shelter and water

Question 4

what is the minimum income standard (poverty threshold based on)

Answer 4

less than 60% median income in 2010/11

stays at a fixed level and does not change over time only is adjusted for inflation, so we can compare across time easily

Question 5

relative poverty definition

Answer 5

any individual/household that earns an income below a specific proportion of a country’s median income

Question 6

what is the relative poverty threshold based on

Answer 6

below 60% of the median household income level in the current year

isn’t a fixed rate and changes overtime, changes to represent housing costs and changes in income

Question 7

what does it mean to be in relative poverty

Answer 7

means they’d be excluded from the type of material activities and opportunities that other can afford

> unequal opportunities

Question 8

what are 3 reasons poverty is caused

Answer 8

• ageing population
  -unemployment and the benefits system
• low and depressed wages
  -discrimination

Question 9

how does an ageing population cause poverty

Answer 9

increases the number of people that rely on pension to supplement their income

> does the state pension keep up with living standards
–> if no then could be relatively/absolute poverty

Question 10

how does unemployment and the benefit system cause poverty

Answer 10

if individuals lose their jobs and claim benefits, the income they receive is far below that of the average household

Question 11

how does low and depressed wages cause poverty

Answer 11

workers in industries that have seen their wages reduced to a low level are inevitably going to be relatively poor

Question 12

what are 2 individual consequences of poverty

Answer 12

• reduces opportunities
• damages confidence

Question 13

what are 2 social consequences of poverty

Answer 13

• increased crime rates
• skill erosion (damages local economy)

Question 14

what are 2 national consequences of poverty

Answer 14

• educational deprivation
• economic damage

Question 15

fiscal drag definition

Answer 15

the failure of the government to raise tax thresholds to keep up with inflation results in people on lower incomes paying more tax over time

It is where nominal incomes increase to match inflation (real incomes stay the same), but the tax bracket doesn’t change so they get pushed into higher tax bracket groups

Question 16

How can fiscal drag be explained

Answer 16

A person earning £10,000 in 2018 will not get taxed but if many years down the line with inflation prices rise by 2x so their income rises by 2x so their real income doesn’t change

If the government fail to bring the tax brackets up too they will no be taxed 20% due to being over the tax threshold

Question 17

Poverty trap definition

Answer 17

people on a low wage get trapped in relative poverty due to the overlap between the point at which tax gets paid on income and benefits are received

every £1 earned in the overlap leads to:
> reduces benefits
> tax liabilities

Question 18

what are 3 ways to solve the poverty trap

Answer 18

• reform the benefits system
  > everyone gets the same flat benefits so there is no cap to benefits
• change tax free threshold
  > raise it so they can earn more money without paying tax
• employment legislation
  > force firms to pay higher wages (standard living wage or up the minimum wage)

Question 19

unemployment trap definition

Answer 19

those unemployed choose to remain out of work due to the generosity of the benefits system

for low skilled workers the incentive to work becomes twisted
> due to having to pay income tax
> national insurance contributions
> and potentially loss of welfare benefits

Question 20

3 ways to solve the unemployment trap

Answer 20

• reform the benefits system
  > to increase work incentive
• tax reforms
  > reduce low wage tax burden
• employment legislation
  > enforcement of national minimum and living wage

Question 21

what is an issue of dealing with poverty

Answer 21

perception of fairness
> who is to say what is fair or not