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

overty covid examle

The ​covid-19​ pandemic is said to have ‘wiped out’ decades worth of poverty alleviation, as tourism came to a halt for most of 2020, and nearly all countries temporarily shut their borders to outsiders to prevent the spread of the virus. In addition, students have been forced to learn from home and take exams from their laptops, which has proved ineffective. This means students are equipped with less skills and fewer qualifications, thus stunting their ability to earn high-paying jobs, which further widens the gap between high and low-income families.

● The coronavirus has also exacerbated the ​North-South divide ​in the UK, as most people in London work in the services sector, and so can manage to work from home with a laptop and internet connection. In contrast, many households in the North of England have jobs in the manufacturing industry, so find it much harder to be able to work from home and have therefore been made redundant as a result - this is referred to as ​structural

unemployment​. The UK currently has the most regionally unbalanced economy in Europe.