Poverty (Copy)

5.2 Poverty

5.2.1 Definition of Absolute and Relative Poverty

• Absolute Poverty
  • When people do not have enough income to afford basic necessities of life (food, clothing, shelter, healthcare).
  • World Bank definition often uses an international poverty line (e.g., living on less than $2.15 per day).
  • Common in developing countries.
• Relative Poverty
  • When people have incomes significantly lower than the average in their society, making them socially excluded.
  • Linked to inequality rather than survival.
  • Common in developed countries.

5.2.2 Causes of Poverty

• Unemployment: Lack of jobs or long-term joblessness leads to no regular income.
• Low wages: Workers may earn below subsistence level, even if employed.
• Illness and disability: Prevent individuals from working or earning sufficiently.
• Old age: Elderly may lack pensions or savings, leading to poverty.
• Lack of education/skills: Limits access to high-paying employment opportunities.
• High population growth: Increases dependency ratio and strains household income.
• Economic instability: Inflation, recessions, or war can worsen poverty.
• Discrimination: Gender, ethnic, or social inequalities may restrict access to income.

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Economics Full Scale Course

5.2.3 Policies to Alleviate Poverty and Redistribute Income

Promoting Economic Growth:

• Expands job opportunities and incomes.
• Reduces absolute poverty by increasing output.

Improved Education and Training:

• Provides skills for higher-paying jobs.
• Reduces structural unemployment.

More Generous State Benefits:

• Welfare payments, pensions, unemployment benefits.
• Provides safety net for vulnerable groups.

Progressive Taxation:

• Higher-income individuals taxed at a higher rate.
• Redistributes wealth to fund welfare programs.

National Minimum Wage:

• Ensures workers receive a fair wage.
• Protects low-income earners from exploitation.

Other Measures:

• Healthcare access to reduce poverty caused by illness.
• Microfinance and small business support.
• Social housing and food subsidies.

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Economics Full Scale Course