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Economics Of Inequality and Poverty, struggle to uptake a job due to…
Economics Of Inequality and Poverty
Poverty & Inequality
Absolute Poverty
This is the minimum amount of resources a person needs to meet basic human needs such as food, shelter, clean water and clothing.
Relative Poverty
People are in relative poverty if they are living below a certain income threshold in a particular country.
This is normally when someone earns well below a country's median income level.
Problems with Relative Poverty
Relative Poverty levels will be different in developed vs developing countries. This is because someone that is poor inn UK might not be poor in India
It is highly subjective
Its not deemed to be very accurate although it is used to make international comparisons
It will change over time from country to country
World Banks measure of Absolute Poverty
In 2015: World Bank defined the international poverty line to be at $1.90 a day. It was previously at $1.25 in 2005.
Other measures a poverty
Factors influence changes in absolute and relative poverty
Education & Training
Pension
State of the Economy
Access to Basic Public Services
Inheritance
Wage Rates
Unemployment
Ownership of assets e.g. property
Distribution of Income
Countries Debt
Tax Rates
Social Benefits
Human Poverty Index - HPI
HP1
measure of deprivation in the poorest countries in the world, main elements:
Percentage of people not expected to survive until age 40
Percentage of people who are not literate
Percentage of the population who do not have access to clean water or healthcare
HP2
measure for developed countries around the world
Probability at birth not surviving at age 60
Number of adults literate
Percentage of the population below the income poverty line.
(50% of median household income of a country)
Rate of long term unemployment
Inequality
Equality
Same/similar economic outcome for different groups
Equity
Fairness, a normative concept
Income
Income is a flow concept (usually generated by salary) , e.g money earned over a period of time.
Wealth
A stock concept and to do with the assets a person owns, e.g property, shares, car, yacht etc.
Causes of Poverty
Wage of Unemployment Inequality
Workers who possess qualifications and a higher level of education can earn higher wages than those who don't, making it harder for those without education to secure a well paid job.
Countries which dont have NMW may struggle mostly and fall into Poverty Trap.
Deindustrialisation
caused structural unemployment to rise, leading to deterioration of workers' skillsets and long-term unemployment
Taxes
Regressive Tax Systems
lower income pay larger tax than higher income
widening inequality between rich and poor, causing greater poverty.
Political Factors
Wars and other conflicts may cause people to flee their home annd destroy of any asstes
Impact of Poverty
Economy
Most of the higher-paying jobs become inaccessible without a basic level of education, hindering the economy's ability to grow and improve its productive potential
Education
Families may face an opportunity cost between feeding their children and sending them to gain education if they are on low incomes. If this is the case, it can be difficult for them to escape poverty as they get older.
Health
Lower life expectancies and poorer standards of health are associated with higher rates of poverty due to the limited access to resources/clean sanitation
The Lorenz Curve
highlights the income distribution of a country against its population
The further the Lorenz Curve is from the 45-degree line, the less equal the distribution of income will be
Gini Coefficient
Define: Area between the Lorenz Curve and Line of Equality (Area A)
When Gini Coefficiennt = 0 shows perfect equality, where all values are the same (e.g everyone have same income)
When Gini Coefficient = 1 shows maximal inequality among values (e.g for a large no. of people only one have income)
struggle to uptake a job due to health restrictions.
Need to constantly take time of which deters MNC from investing
Health Probblems
