4.2.1 Absolute and Relative Poverty

Define Income.

A flow of money over a period of time

How can individuals earn an income?

• Salary

• Rent

• Interest

• Profit

• Benefits

How has the distribution of income in the UK changed?

• The growth of the financial sector so individuals now have higher incomes

• A decrease in trade union membership, this decreases wages for low income individuals

  • De-industrialisation has created the North and South divide

Define Absolute Poverty

Where individuals have insufficient income to afford the necessities essential for survival, like food water warmth shelter and clothing

Define Relative Poverty.

Where household income is lower than 60% the median income in a country

What are the causes of income inequality and poverty?

• Differences in skills and qualifications. High skilled individuals are very productive which increases income

• De industrialisation. Lower wages in the North vs the South

• Spare capacity. Lack of housing due to lack of land in areas like london house prices going to be very high

• Unequal holdings of wealth. Wealth generates income, unequal differences in wealth differences in income

• Differences in household composition. Families made up of different age groups demographics experience differences in earnings

How can the distribution of income be illustrated?

• Lorenz curve

Draw the Lorenz curve and explain its sentence

Poorest X percent of households have Y percent of national income

What is the gini coefficient?

• A numerical measure of income inequality between 0 and 1

How is the gini coefficient calculated?

A/(A+B)

What do the numbers close to 0 or 1 represent in terms of equality?

• Closer to 1 More unequal society

• Closer to 0 more equal society

Define wealth

A stock of assets that have a financial value

What is one statistic showing how wealth is distributed in the UK?

• 20% of the UK wealth is owned by 1% of the population

What are 4 causes of wealth inequality?

• Inheritance. Wealth is passed down generation to generation

• Income inequality. Higher incomes more wealth as they are more able to save

• Differences in entrepreneurship skills. EG elon musk

• Marriage patterns of the wealthy. Wealthy people marry other wealthy people

Define capitalism

Capitalism is where there is minimal government intervention and resources are distributed according to the market

In a capitalist society entrepreneurs take risks and are driven by the profit motive

What are the 2 disadvantages of capitalism?

• Low incomes. Lower living standards cannot afford basic necessities like food and housing

• Cause poverty trap, if an individual is unemployed children see this as normal and acceptable to do the same (working class subculture). May not have equal educational opporunities 90% of failing schools are in deprived areas

What are 2 arguments for capitalism?

• Inequality is required or there is no incentive to work harder

• If you do not have a job you will be given benefits, helps people overcome ansolute poverty. Also free and equal access to health and education

What are the 6 polifies which can be used to reduce inequality and poverty?

• Tax and benefits system

• Increase in the national living wage

• Improving quality of education and training

• Improve the health of the nation

• Increasing the availability and affordability of childcare

• Increased provision of social housing

Showwww the policies on handout soz too lazy

What does the kuznets inequality curve states?

• Inequality in poor countries is a transitional phase and once nations become economically developed inequality reduced

• As we move from a primary sector to a secondary sector income inequality increases. Wages of thosr in manyfacturing sector are rising faster than those working in the agricultural sector. When incomes increase even further government increases tax revenue and increases spending on education healthcare benefits which increases skills.