3.6.1 Absolute and realtive poverty

Poverty

Poverty occurs when individuals or households are

deprived of material possessions and income which

stops them from having a decent standard of living

Absolute poverty

Absolute poverty means that individuals or households

are deprived of basic human needs

These might include food, shelter and energy

Relative poverty

Relative poverty occurs when individuals or households

are poor in comparison to the rest of the population

Inequalities in the distribution of income and wealth

are a main reason for povert

Causes of poverty

Causes of poverty

Age

-older people more likely to suffer relative poverty

Low wages and unwaged

Measures of poverty

Measures of poverty

Poverty can be measured in a number of ways,

including:

Minimum income standards (MIS) – a measurement of

what is required to achieve a minimum acceptable

standard of living

Households Below Average Income (HBAI) – based on

government statistics, the poverty line is said to be

where household income is below 60% of median

household incomes

Material deprivation – how affordable a basket of goods

and services is in order for individuals to have an

acceptable standard of living in their own count

Measures of international poverty

Measures of international poverty

The international poverty line is a global measurement

of poverty

It looks at the purchasing power of individuals within a

country in dollar terms

This uses purchasing power parity to take into account

the cost of living in each country

In 2015 the World Bank used an income of $1.90 a day,

below which an individual lived in extreme poverty

The poverty gap index measures how far, on average,

individuals are from the poverty line

This takes into account the depth of poverty in a countr

Effects of poverty

Measures of international poverty

The international poverty line is a global measurement

of poverty

It looks at the purchasing power of individuals within a

country in dollar terms

This uses purchasing power parity to take into account

the cost of living in each country

In 2015 the World Bank used an income of $1.90 a day,

below which an individual lived in extreme poverty

The poverty gap index measures how far, on average,

individuals are from the poverty line

This takes into account the depth of poverty in a countryEffects of poverty

Income will be redistributed back to higher earners

with increased saving and wealth

There may be increased investment as the returns for

entrepreneurs improve e.g. lower tax rates

Capitalism can exacerbate levels of inequality as the

capitalist owns the means of production

The ownership of assets will lead to higher income

leading to even greater inequality in the futur