Poverty and inequality

What is absolute poverty?

Living below subsistence, meaning a person cannot meet basic needs such as food, clean water, sanitation, health, shelter, and education.

How does the World Bank measure absolute poverty?

By the number of people living on less than $2.15 per day.

What is relative poverty?

Poverty measured in comparison to the average income in a country.

How is relative poverty measured in the UK?

People earning below 60% of the median income are considered in relative poverty.

How does the US measure relative poverty?

Using a basket of goods that maintains the average standard of living.

What does the Human Poverty Index (HPI) measure?

Life expectancy, education, and the ability to meet basic needs.

What are the two types of HPI?

• HPI-1: Measures poverty in developing countries.

• HPI-2: Measures poverty in developed countries.

What does HPI-1 include?

• Probability of living to 40

• Adult literacy rate

• Percentage of underweight children

• Access to improved water sources

How does HPI-2 differ from HPI-1?

HPI-2 focuses on developed countries and measures:

• Probability of not surviving to 60

• Percentage of adults without literacy skills

• Poverty below 50% of median income

What does the Lorenz curve show?

The distribution of income and wealth in a country compared to perfect equality.

What does the line of perfect equality represent?

When the richest x% of the population owns x% of total income.

What does a Lorenz curve that bows outward indicate?

A high level of inequality, where wealth is concentrated among the richest.

What is the Gini coefficient?

A numerical measure of inequality, derived from the Lorenz curve.

What do Gini coefficient values indicate?

• 0 = Perfect equality (everyone has the same income).

• 1 = Perfect inequality (one person/household owns all the wealth).