Absolute poverty: the inability to afford basic necessities needed to live (food, water, education, health care and shelter). This is measured by the number of people living below a certain income threshold.
Relative poverty: the condition of having fewer resources than others in the same society. It is measured by the extent to which a person;s or household’s financial resources fall below the average income level in the economy. Relative poverty is basically a measurement of income inequality since a high relative poverty should indicate a higher income inequality.
Causes of poverty
- unemployment: when people are unemployed and have go without income for a long time, they may end up having to sell their possessions
- low education levels: this means that people are uneducated, unskilled and unable to find better jobs, keeping them in poverty
- The size of family: more family members with only few people earning, means more costs of living, pulling the family into poverty if they’re not earning much
- age: older people are likely to have more health problems and less suitable for further employment, causing poverty. Young people are still employable and will find ways to earn an income.
- poor government support for basic services
- poor health: ill mental and physical health is both a cause and result of poverty
- overpopulation: high population density will put pressure on scarce resource and the economy may not be able to produce and provide for everyone, causing poverty
- minority group/ethnicity/migrants: will face discrimination from bureaucrats, employers and the society at large and so won’t be able to access and enjoy all services. E.g.: African-Americans in the US tend to be poorer than their white counterparts
- gender: women usually face discrimination, especially in employment and end up being poorer than men
Policies to alleviate poverty
- Introduce measures to reduce unemployment: an expansionary fiscal/monetary policy will increase aggregate demand and increase employment opportunities. Income and standards of living will rise.
- Impose progressive taxes: income taxes are progressive, that is, they increase as incomes increases. Imposing these will mean that people on higher incomes will pay a large percentage of their incomes as tax and help reduce relative poverty.
- Introduce welfare services: money from taxes can be provided as income support to people with very low incomes. It can also be used to provide free or low-cost homes, healthcare and education.
- Introduce minimum wage legislation to raise the wage of low-paid employees
- Increase the quantity and quality of education.
- Attract and invite inward investments from firms abroad to provide jobs and incomes for people.
- Overseas aid could be gained from foreign governments and aid agencies. This will include food aid, financial aid, technological aid, loans and debt relief.
Notes submitted by Lintha
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