Unit 4: Poverty

Question 1

What is meant by Relative Poverty?

Answer 1

Earning a low income compared to other incomes within their economy/society

For the UK, this is earning an income that is 60% of the median income or less.

Question 2

What is meant by Absolute Poverty?

Answer 2

When a person’s continued daily existence is threatened because they have insufficient resources to meet their basic needs

Earning below the poverty line

Question 3

What is the Absolute Poverty Line?

Answer 3

If people earn below this line, they’re in Absolute Poverty

In 2008, The World Bank set the poverty line to $1.25 a day
Some economists put it at $2 a day

Question 4

What is Poverty Measures with?

Answer 4

Human Poverty Index

This consists of HPI-1 and HPI-2

Question 5

What is the HPI-1?

Answer 5

The HPI-1 is a measure of deprivation in the poorest countries in the world

Consists of 3 elements:
% of people expected to reach the age of 40
% of population who are illiterate
% of children who are illiterate, and % of the population who don’t have access to safe water + healthcare

Question 6

What is the HPI-2?

Answer 6

A measure of poverty more relevant to developed countries

Consists of 4 elements:

• Probability at birth of not surviving to 60 (x 100)
• Adults lacking functional literacy skills
• Population below relative income poverty line
• Rate of long term unemployment (lasting at least 12 months)

Question 7

What are the Causes of Relative Poverty in the UK?

Answer 7

1. Inequality in Wages + Earnings
2. Falling Relative Value of State Benefits
3. Higher levels of Structural + Long Term Unemployment
4. Regressive Taxes
5. Inheritance

Question 8

How does Inequality in Wages and Earnings cause Relative Poverty in the UK?

Answer 8

• De-industrialisation leaves sector jobs having lower pay
• Those in the Public Sector earn less than those in the Private Sector
• Increase in part time/temporary jobs (which may give low pay)
• Decrease in trade unions- many workers unable to bargain for higher wages
• Increased demand for highly skilled workers

Question 9

How does the Falling Relative Rate of State Benefits cause Relative Poverty in the UK?

Answer 9

• Pensions and other benefits go in line with the inflation rate
• Wage rates increase faster than inflation rates

Question 10

How do Higher Levels of Structural and Long Term Unemployment cause relative poverty in the UK?

Answer 10

• Unemployment is the biggest cause of poverty in the UK
• … because people rely on benefits
• 65% of the poor aren’t in work

Question 11

How do Regressive Taxes cause relative poverty in the UK?

Answer 11

• Regressive Tax: Tax that increase rate, while income decreases
• Tax changes in the 80s and 90s put a higher burden on the poor
• There’s been a shift in taxes from progressive income tax to regressive indirect taxes
• The government has increased VAT and indirect taxes on alcohol + petrol, which take a higher % on those with low incomes

Question 12

How does Inheritance cause Relative Poverty in the UK?

Answer 12

• This allows wealth inequality to be passed on, and is quite important in the housing market

Question 13

What are the poverty Statistics for Ethiopia?

Answer 13

Out of 80m people (2008), 35m live under the poverty line (44%)

More than 12m are chronically or periodically food insecure

80% of Ethiopians are dependent on agriculture

Question 14

In which areas in Ethiopia are poverty Pronounced?

Answer 14

Poverty in Ethiopia is more pronounced in the rural areas as compared to the urban areas.

The situation recently worsened due to sharp increases in the prices of food + fertilisers on world markets- making it harder for poor household in Ethiopia to secure adequate food supplies

Question 15

What are the Causes of Absolute Poverty in Ethiopia?

Answer 15

Arid conditions (inc. insufficient rainfall) - leads to irregular production of agriculture; as well as periodic famines

Improper strategies to market/advertise

Poor development of technology/transportation

Failure of rural people participating in awareness programs

HIV/AIDS pandemic - 6% of adults have it

Question 16

What are the General Causes of Relative + Absolute Poverty?

Answer 16

Changes in the rate of economic growth,

Economic development,

FDI,

Policies which result
in increased trade,

Government tax and benefits policies,

Changes in asset
prices.