Section 3.4 Inequality & Poverty Vocabulary

Equity

the state or quality of being just, fair, or impartial; fair and equal treatment; something that is fair

equality

the state of being equal, especially in status, rights, and opportunities.

Economic inequality

Differences in the income/wealth of different households (rich, middle class and poor)

Unequal distribution of income

Is a situation where income is not shared equally among the population, leading to significant disparities between different individuals, groups, or countries.

Unequal Distribution of Wealth

Is the uneven spread of assets like stocks and property among a population, creating a large gap between the rich and the poor.

Lorenze curve

A curve that graphs the cumulative percentage of income (or wealth) against the cumulative percentage of households.

Gini Coefficient (Gini Index)

A statistical formula that measures the amount of inequality in a society; its scale ranges from 0 to 1, where 0 corresponds to perfect equality and 1 to perfect inequality

Poverty

Inability to meet basic needs for food, clothing, and shelter.

Absolute poverty (extreme poverty)

Is a severe deprivation of basic human needs, including food, safe water, sanitation, health, shelter, education, and information. It is often measured by a lack of income to afford these basic necessities, with the World Bank defining it as living on less than $2.15 per day (using the updated 2017 purchasing power parity-based standard)

International Poverty Line

Is a global standard used to measure and compare poverty across countries, with the current extreme poverty line set by the World Bank at $2.15 a day in 2017 purchasing power parity (PPP).

Relative poverty

A condition where household income is a certain percentage below median incomes.

Minimum Income Standard (MIS)

Refers to a research method establishing what incomes households require in order to reach a 'minimum' standard of living,

Multidimensional Poverty Index (MPI)

A composite indicator that measures poverty in three dimensions: health, education, and living standards, each of which reflects deprivations.

Inequality of opportunity

is concerned with inequalities in potential outcomes in standard of living that arise from circumstances tht are beyond one's control.

Globalization

Refers to economic interconnectedness throughout the world in many areas (trade, finance, investment, people, technology, ideas, knowledge, communications, and culture).

Direct taxes

Taxes paid directly to the government tax authorities by the taxpayer, including personal income taxes, corporate income taxes, and wealth taxes.

Indirect taxes

Taxes levied on spending to buy goods and services, called indirect because payments of some or all of the taxes by the consumer is paid to the government authorities by the firms.

Proportional taxation

Taxation where as income increases, the fraction of income paid as taxes remain constant.

Progressive taxation

the tax as a percentage of income increases as income increases

Regressive taxation

the tax as a percentage of income decreases as income increases

Marginal tax rate

the extra taxes paid on an additional dollar of income

Average tax rate

total taxes paid divided by total income

Transfer payments

payments by the government to households for which the government does not receive a new good or service in return

Universal basic income

A form of social security in which all citizens or residents of a country regularly receive an unconditional sum of money, either from the government or some other public institution, in addition to any income received from elsewhere.

Poverty Cycle

Arises when low incomes result in low savings, permitting low investments (in physical, human, and natural capital), and therefore, low productivity leading to low incomes.

Poverty trap

A circular chain of events starting and ending in poverty. This is usually to a low level of savings which lead to low level of investment/low spending on health and education, which lead to low productivity which leads to low income.

minimum wage

lowest legal wage that can be paid to most workers