4.2 Inequality and Poverty

Question 1

Absolute poverty definition

Answer 1

people are unable to afford sufficient necessities to maintain life

Question 2

UN definition of absolute poverty

Answer 2

Severe deprivation of basic human needs including food, safe drinking water, sanitation facilities, health, shelter, education and information

Question 3

what does the world bank describe absolute poverty as

Answer 3

living on less than $1.90 a day

Question 4

what is correlated with economic development

Answer 4

absolute poverty

Question 5

what is relative poverty

Answer 5

peoples income compared to others in their area
A persons income falls below an average income threshold in their area
Bottom of the income scale

Question 6

what is a bigger issue regarding poverty in the UK

Answer 6

relative poverty

Question 7

what is relative poverty in the UK described as

Answer 7

less than 60% of the median income (£27,300 in 2017)

Question 8

how many people live below the poverty line in the UK

Answer 8

1/5 which is 14 million

Question 9

what is a different definition of relative poverty that is more socially based

Answer 9

people who cannot afford to buy goods that mean they aren’t considered poor according to social norms eg a fridge or a mobile phone

Question 10

what is the poverty line

Answer 10

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

Question 11

what is the poverty trap

Answer 11

people on low income where the tax ad benefits system disincentivise looking for work or loner working hours as they would lose income to tax and NICs and benefits

Question 12

what causes poverty

Answer 12

unemployment
Lack of skills
Health issues
Income dependency

Question 13

What is income dependency

Answer 13

a household is dependent on external income sources such as benefits, remittances or financial support from family members

Question 14

What happens to absolute poverty when GDP increases

Answer 14

absolute poverty falls

Question 15

what are the 2 main causes of relative poverty

Answer 15

high salary jobs have larger wage growth compared to lower salaries
The government changes their spending and taxation

Question 16

why has absolute poverty been increasing in the UK

Answer 16

Wage growth inequality
De-industrialisation
Underemployment
Decline of trade unions
State benefits have fallen
Structural unemployment

Question 17

why has wage inequality caused absolute poverty

Answer 17

public sector wages have had falling real wages
Wages of the richest are 170 times larger than the average worker

Question 18

how many times larger are the richest peoples wages compared to the average salary

Answer 18

170x the average worker up from 60x previously

Question 19

why has de-industrialisation caused absolute poverty

Answer 19

more service (tertiary sector) jobs which are lower paid

Question 20

why have trade unions disappearing caused absolute poverty

Answer 20

workers are unable to bargain for higher wages

Question 21

why have state benefits caused absolute poverty

Answer 21

they have fallen in relative value whilst taxes have become more regressive

Question 22

what is income

Answer 22

a flow of earnings

Question 23

what is wealth

Answer 23

a stock of asset

Question 24

what is more likely to be unevenly distributed, wealth or income

Answer 24

wealth as it can be accumulated over time, wealthy people can use their assets to generate income which is then stored as wealth and accumulates

Question 25

what is the Lorenz curve

Answer 25

shows hte cumulative percentage of population plotted against percentage of income those people have, perfect equality would be a diagonal line

Question 26

what is the Gini Coeffecient

Answer 26

A/(A+B) of the Lorenz curve Closer to 0 is best, 1 is most unequal

Question 27

how is information on wealth and income often presented

Answer 27

in percentiles, deciles or quintiles

Question 28

how do wages cause inequality

Answer 28

Some workers earn more than others, due to factors such as education, skills or availability to work longer Higher income means more chance to accumulate wealth and assets

Question 29

why do wealth levels create inequality

Answer 29

inheritance or savings creating wealth is faster and easier to build up wealth compared to lower income people

Question 30

How does chance create inequality

Answer 30

if you bought a house in the right place or the right assets such as Nvidia stocks, you may be lucky and their value will increase You may inherit lots of wealth Your job might become more important and earn more

Question 31

how does age affect inequality

Answer 31

old people will have had a chance to accumulate their wealth Young people haven’t had enough time to increase their value to employers and therefore their wages

Question 32

what are causes for inequality between countries

Answer 32

wars Droughts Famines Natural disasters Favourable trading between developed countries

Question 33

what is Kuznets Hypothesis

Answer 33

as society develops and moves from primary to secondary industry, inequality will increase as industrial workers wages will rise faster, wages are taxed and then wealth is redistributed so inequality should fall

Question 34

why did Picketty discredit Kuznet’s Hypothesis

Answer 34

Inequality rises as the country develops and the rate of return on capital grows Therefore the rich get richer and inequality increases

Question 35

Why does a capitalist economy lead to inequality

Answer 35

wage differentials as they are based on supply and demand and this varies between jobs

Question 36

why does owning resources affect inequality

Answer 36

assets held can be passed on or increased through income saving as wealth differs

Question 37

what is arguably true in a capitalist society?

Answer 37

there can never be equality as it discourages hard work No incentive means no one will try Inequality is necessary for Capitalism to work

Question 38

what is true about equality in capitalist economies

Answer 38

some inequality is necessary and desirable but excessive inequality causes problems with Effeciency and social justice