4.2.1 Absolute and relative poverty

absolute poverty

when a household does not have sufficient income to sustain even a basic acceptable standard of living and to meet people’s essential, core needs

what did the world bank define absolute poverty as in 2025

anyone who was living on less than $3.00 a day

relative poverty

household income is considerablyy lower than the median income within a country

uk’s definition of relative poverty

households that are living with less than 60% of the median household income

relative poverty number uk 2022

• In May 2022, the median UK monthly household income was £2072/month

  • This meant that the relative poverty line was any household earning less than £1243,20/month

number of people in relative poverty in early 2022 UK

22% of the UK population was in relative poverty

changes in absolute poverty since 1990

• There has been a significant decrease in absolute poverty since 1990

  • There were 1.9 billion people in absolute poverty in 1990. By 2022 it had fallen to 750 million

causes of absolute poverty

• low and unstable household incomes

• absence of financial/welfare safety nets

• poor access to public and merit goods

• high unemployment/underemployment

• dependence on low value added industries

• debilitating impact of malnutrition

cause of relative poverty

• income inequality

• wealth distribution

• debt repayments

• educational disparities

• educational attainment

• housing costs

causes of changes in absolute poverty

• economic growth decreases absolute poverty]

• Government tax and benefit policies can support the most vulnerable groups in society

causes of changes in relative poverty

• Rising asset prices can decrease relative poverty in households which own their own properties

• Trade liberalisation increases potential market size and output in an economy

  • This leads to an increase in the demand for labour and a wage rise

  • This creates additional income which has a multiplier effect and pulls households out of relative poverty

• Decreased levels of government benefits can lower household income and increase relative poverty

poverty trap

• affects those in poverty-relying on state benefits or on low wages and means tested benefits

• when they earn higher wages may only receive a small % of their wage increase as have to pay incoem tax and national insurance and benefits reduced

• this could lead to drop in disposable income to marginal tax rate is high

• so it can be financially disadvantageous for some to find work or increase number of hours working

why has relative poverty been increasing in uk

• gorwing inequality in wages growth

• deindustrialisation

• growth in underemployment,zere hour contracts,part time and temporary jobs

• decline of trade nions

• state benefits fallene

• long term and structural unemployment risen