Poverty

Absolute poverty

Individuals are unable to afford basic necessities required to live. Unable to afford an acceptable standard of living. Also known as extreme poverty. World Bank consider this to be $3 per day at PPP values

absolute poverty -correlation, analysis

Absolute poverty can decline at the same time relative poverty increases.

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

When a households income is considerably lower than the median income within a country. The relative poverty line, set by the world bank is usually at household disposable income being less than 60% of median income.

Relative poverty-correlation, analysis

There may be relative poverty in a country but not necessarily absolute poverty.

Within the UK, relative poverty is a bigger issue. It will always exist in a society that is not completely equal. Relative poverty is about people's income compared to others in their area. Someone is said to be in relative poverty if their income falls below an average income threshold for the economy; they are at the bottom end of the income scales

Measure of absolute poverty

Poverty line

The poverty line is the minimum level of income deemed necessary to achieve an adequate standard of living in a given country.

Poverty trap

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 difference in rates of absolute poverty

Level of education, level of healthcare, level of infrastructure, wars/natural disasters/droughts, malnutrition (lack of access to food), corruption and poor governance

Causes of relative poverty

Income inequality, wealth distribution, education attainment, unemployment

Distinction between income and wealth

Income is flow of money whilst wealth is a stock of asset accumulated over time

One likely reason why global wealth inequality has increased (2)

Regressive tax VAT -increased wealth inequality by allowing high income individuals to retain larger proportion of their income allow them to invest in assets -accumulate wealth at faster rate compared to those of low income individuals