4.2.1: Absolute and relative poverty

Absolute poverty

• When people are unable to afford sufficient necessities to maintain life

• The world bank defines anyone living on less than $1.90 a day as living in absolute poverty

• The UN defines absolute poverty as ‘a condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information’

• Economic development tends to be correlated with absolute poverty- the more developed a country, the fewer people in absolute poverty

• In developed countries, the government tends to intervene to attempt to provide the necessities

Relative poverty

• Is a bigger issue within the UK- will always exist in a society that is not completely equal

• Relative is about people’s income compared to others in their area

• Someone is said to be in relative poverty if they earn below an average income threshold for the economy- they are at the bottom end of the income scale

• In Britain it is classed as those with an income of less than 60% of median household income

• 1/5 of people in the UK live below the official poverty line

• Another way of defining relative poverty is those who cannot afford to buy goods which they need to buy in oder to not be considered poor according to social norms, e.g a fridge or mobile phone

The poverty line

• The minimum income level deemed necessary to achieve an adequate standard of living in a given country

• The poverty trap affects people on low incomes, when the tax and benefits system creates a disincentive to look for work or work for longer hours

• By working longer hours, individuals may find they lose income due to income tax and national insurance contributions as well as losing some income-related state benefits

Causes of changes

• Poverty is caused by unemployment, a lack of skills, health problems and income dependency

• Absolute poverty tends to fall as GDP increases, assuming that the state provides support to those who are unable to benefit from a growing economy

• The two main causes of growth of relative poverty are those on higher salaries see larger income growth than those on lower salaries or changes in government spending and taxation

• In the UK it is growing due to:

  • Growing inequality in wages growth: The highest paid jobs see their wages increase higher than those on lower wages

  • De-industrialisation: It has increased the number of service sector jobs which tend to be lower paid

  • Growth in underemployment, zero hour contracts, part time jobs and temporary jobs: these all mean lower wages for workers

  • The decline in trade unions: means many workers are unable to bargain for higher wages

  • State benefits have fallen in relative value whilst taxes have become more regressive

  • Long term and structural unemployment has risen