4.2 Poverty and Inequality Flashcards
(20 cards)
What is absolute poverty?
Living below subsistence, unable to meet basic needs of food, clean water, sanitation, health, shelter, and education.
Defined by the World Bank as living on less than $1.90 per day.
What is relative poverty?
Measured by comparison to the average in the country; in the UK, below 60% of median income is considered relative poverty.
In the US, a basket of goods is used to maintain the average standard of living.
What is one cause of changes in absolute and relative poverty?
Inequality in wages or unemployment.
More part-time and temporary jobs limit earnings, especially during economic downturns.
What is structural unemployment?
A type of unemployment where someone is out of work for a long time, leading to skill deterioration.
Often caused by changes in the economy, such as deindustrialisation.
How have government policies affected relative poverty in the UK?
Taxes have become more regressive and state benefits have fallen in relative value.
Public sector workers have faced low wage increases and falling real wages due to austerity.
What health issues contribute to absolute poverty?
Disease, malnutrition, and other health problems can hinder employment opportunities.
Particularly problematic in countries like Sub-Saharan Africa.
What impacts can wars and natural disasters have on poverty?
They can displace people and destroy property, leading to homelessness and extreme poverty.
What is wealth inequality?
The unequal distribution of assets such as houses, shares, land, cars, and savings.
What is income inequality?
Uneven distribution of money received on a regular basis, such as wages or welfare payments.
What does the Lorenz curve illustrate?
The distribution of income and wealth in a country, comparing actual distribution to perfect equality.
What does a Gini coefficient of 0 indicate?
Perfect equality, where everyone has the same income and wealth.
What are some causes of income inequality?
- Inequality in wages
- Welfare payments and taxes
- Unemployment
- Changes to the UK tax system
- Inequality between countries
How have welfare payments affected income inequality?
They tend to increase less than wages, resulting in a smaller real increase for those on benefits.
Recent cuts to welfare payments have further exacerbated inequality.
What is the Kuznets hypothesis?
As societies develop from agriculture to industry, inequality increases initially but is expected to decrease as development continues.
What did Thomas Piketty argue about capitalism and inequality?
The capitalist free market system leads to continued inequality as the rate of return on capital increases.
What is capitalism?
A system where capital is privately owned and resources are distributed according to the market.
How does capitalism contribute to inequality?
- Entrepreneurs are motivated by profit
- Higher wages reflect higher productivity
- Inheritance concentrates wealth
- Monopolies can exploit consumers
What are some ways government intervention can reduce inequality?
- Inheritance tax
- State education
- Regulation of monopolies
Fill in the blank: The Gini coefficient approaches ______ in cases of perfect inequality.
1
True or False: The richest 20% of the population own a lower proportion of income than the poorest.
False
