define absolute poverty
Absolute poverty refers to the number of people living below a certain income threshold that’s considered necessary to meet basic needs, such as food, shelter, and clothing.
what are the measures of absolute poverty?
- poverty thresholds/ poverty lines- set up by governments/organisations
- identifying neccesities required for survival
what are the causes in change of absolute poverty?
- economics growth
- COVID
- labour productivity
what are the causes of absolute poverty?
- low and unstable household incomes
- poor access to basic merit/ public goods
- high unemployment
large scale:
* war & conflict
* policitical- poor governance
* limited access to education
* inadequte infrastructure
define relative poverty
relative poverty is a measure of how well off a person is compared to others in their society. It’s measured as a percentage of the median income in a country, so the threshold for relative poverty varies between countries.
when household income< 60% median income
what are measures of relative poverty?
- income percentiles
- subjective measures
what are the causes of relative poverty?
- income inequality
- wealth distribution
- education disparities
- lack of social welfare policies- unemployment benefits
- unemployment
- inflation
- housing costs
- recessions
what are some policies to tackle relative poverty?
- minimum wage in labour market
- government subsidies for lower fuel and food prices
- progressive tax system
- policies to reduce unemployment
- direct state provision of public and merit goods
chain of analysis on how minimum wage can reduce gini coefficent of a country
- A minimum wage is a statutory pay floor in the labour market that employers legally cannot pay below.
- This means that monopsony employers may now have to pay high wages than before.
- This means hourly wages of low income households will increase, leading to higher total pay
- As a result of this, the income disparity across the region will reduce, decreasing the gini coefficent
give 2 microeconomic reasons for rise in relative poverty in UK
- wage and earning differentials in labour market- fall in real wages due to decline in manufacuring- drop in trade union density. Bonus culturre increases executive pay relative to median pay
- market failures in education, housing ,health: lack of affordable housing,educational disadvantage
what are 2 macroeconomic reasons for rises in relative poverty?
- globalisation: leads to structral unemplyment. real wages face downwards pressure. benefits of globalisation are not distributed evenly
- chnaging taxes and benefits system: regressive taxes and state benefits have become less generous overtime
what are 2 microeconomic effects of high relative poverty in a developing country?
- constraints on domestic demand and business growth: less demand and so less spending on the local economy, lower profits and employment
- impact on human development: harder to save and borrow from unregulated creditors with high intrest rates (debt crisis)
what are 2 macro economic effects of high levels of relative poverty?
- limited tax: with low incomes, income tax revenue is low. This limits funds availiable for public services,infratructure. it also leads to rising levels of national and fiscal debt as governments look at other sources to fund state spending
- human capital gaps and competitvness: limited access to quality education and healthcare hampers the devlopment of a skilled workforce , making it challenging to attract inward investment and grow higher vlaue added industries
