Absolute & Relative Poverty 4.2

Question 1

Absolute & Relative Poverty

Answer 1

Absolute Poverty - Living below subsistence (cannot meet basic needs). World Bank measures it at those earning less than $1.90 per day. Rare in developed countries as gov. often intervenes to provide necessities

Relative Poverty - Measured by comparison to the average in the country, will almost always exist in an unequal economy. In the UK, those with below 60% of median income are considered to be in relative poverty. 1/5 in the UK live in relative poverty

Question 2

Causes of changes in absolute and relative poverty

Answer 2

Unemployment

Lack of skills

Absolute poverty tends to fall as GDP increases, assuming the state provides support to those who do not benefit from a growing economy

Relative poverty often caused if high earners see larger income growth than those on low salaries, or change in government spending and taxation

Question 3

Poverty Trap

Answer 3

When the tax & benefits system disincentivises the unemployed to find work e.g. Income tax or benefits too high

Question 4

Relative Poverty in the UK A02

3

Answer 4

Growing inequality in wage growth as those in the public sector have seen falling real wages due to austerity. Wages of the richest are now 170x average worker wage, compared to 60x 2 decades ago

State benefits have fallen in real value whilst taxes have become more aggressive

Decline of trade unions reducing wage bargaining power