4.2
ABSOLUTE AND RELATIVE POVERTY
ABSOLUTE POVERTY VS RELATIVE POVERTY
poverty line - minimum level of income required to achieve an adequate standard
of living in a given country
poverty trap - when the tax and benefits system creates a disincentive to look for
work, this affects those on low incomes
ABSOLUTE POVERTY
When people are unable to afford sufficient necessities to maintain life
UN definition: ‘’severe deprivation of basic human needs: food, safe drinking
water, sanitation facilities, health, shelter, education, information’’
World bank definition: anyone earning less than $1.90 a day
Economic development is negatively correlated with absolute poverty
the more developed a country - less absolute poverty
in developed countries the government will intervene to attempt to provide
basic necessities
RELATIVE POVERTY
When peoples incomes/living standards are relatively less compared to others
in their area
falls below the average income threshold for the economy
earning less than a particular percentage of a country’s average income
always exists in unequal societies
big issue in UK
4.2 1
, in Britain it is classed as those who earn over 60% less than median
income (27000 in 2017) after deducting household costs
CAUSES OF CHANGES IN POVERTY
Poverty may be caused by unemployment, lack of skills, health issues, income
dependancy
Cycle of poverty
low savings → low investment → low income
Increasing GDP
as GDP increases, absolute poverty falls
this assumes that the government provides support to those who are
unable to benefit from a growing economy
Increasing income inequality
if those with higher incomes experience higher income growth than those
on low salaries
increase income inequality
increases relative poverty
Increasing Infrastructure investment
increases the amount of jobs available
decreases unemployment, and increases incomes
more can escape poverty
increases productivity
increases income
e.g more electric rails in china
more electricity to factories
increases productivity
increase incomes
4.2 2
ABSOLUTE AND RELATIVE POVERTY
ABSOLUTE POVERTY VS RELATIVE POVERTY
poverty line - minimum level of income required to achieve an adequate standard
of living in a given country
poverty trap - when the tax and benefits system creates a disincentive to look for
work, this affects those on low incomes
ABSOLUTE POVERTY
When people are unable to afford sufficient necessities to maintain life
UN definition: ‘’severe deprivation of basic human needs: food, safe drinking
water, sanitation facilities, health, shelter, education, information’’
World bank definition: anyone earning less than $1.90 a day
Economic development is negatively correlated with absolute poverty
the more developed a country - less absolute poverty
in developed countries the government will intervene to attempt to provide
basic necessities
RELATIVE POVERTY
When peoples incomes/living standards are relatively less compared to others
in their area
falls below the average income threshold for the economy
earning less than a particular percentage of a country’s average income
always exists in unequal societies
big issue in UK
4.2 1
, in Britain it is classed as those who earn over 60% less than median
income (27000 in 2017) after deducting household costs
CAUSES OF CHANGES IN POVERTY
Poverty may be caused by unemployment, lack of skills, health issues, income
dependancy
Cycle of poverty
low savings → low investment → low income
Increasing GDP
as GDP increases, absolute poverty falls
this assumes that the government provides support to those who are
unable to benefit from a growing economy
Increasing income inequality
if those with higher incomes experience higher income growth than those
on low salaries
increase income inequality
increases relative poverty
Increasing Infrastructure investment
increases the amount of jobs available
decreases unemployment, and increases incomes
more can escape poverty
increases productivity
increases income
e.g more electric rails in china
more electricity to factories
increases productivity
increase incomes
4.2 2
