DEFINITION OF ABSOLUTE AND RELATIVE POVERTY
Understand the difference between absolute and relative poverty
Identify the causes of poverty including unemployment, low wages, illness and age
Recognize and discuss policies including those promoting economic growth, improved education, more generous state benefits, progressive taxation and a national minimum wage
INTRODUCTION: One of the main problems of using HDI data and Real GDP per capita is that it does not make allowances for extremes of wealth and poverty in a country.
Absolute poverty is the inability to afford basic necessities needed to live successfully, such as food, water, education, healthcare, and shelter. The measure of absolute poverty is usually measured by the percentage of people living below a certain level of income.
In 2017 the World Bank defined extreme absolute poverty as those living under $1.90 per day and ‘moderate poverty’ as living on $3.10 per Day. In 2016 an estimated 11% of the world population lived in extreme poverty. Half of these people were living in sub-Saharan Africa.
Symptoms of Absolute Poverty include malnutrition, severe deprivation of food, clean drinking water, health shelter and information.
Relative poverty is a condition of having fewer resources than others in the same society. It is usually measured by the extent to which a person or a household’s financial resources fall below the average income level in the economy.
Despite incomes rising in many economies, gains in income and welfare are not shared equally as you can see in a Lorenz Curve or through the Gini-coefficient. Relative poverty is therefore a comparative measure, measuring differences in the distribution of wealth. It could be for example the number of people living in the bottom 25% income level (Quartile) of a country. Relative poverty in developed countries could include less access to education, healthcare travel and ownership of consumer durables such as washing machines, freezers and even television.
ACTIVITY 1: Study the Lorenz Curves below, what can you suggest about the nature of income distribution in the USA and how might this affect relative poverty in the USA?
Comparing the Distribution of Income:
ACTIVITY TWO: Identify 5 countries that have the greatest equity income distribution (20-30, 5 in the middle 30-40 and 5 at the bottom less than 50) What do you notice about the levels of economic development of these countries?
- Identify the area of Houston in which you live, how many as a percentage of the population live below the poverty line?
- As a generalization which areas of Houston can you identify higher relative poverty?
- Why might this be so?
Fig. 3 Relative Poverty in Houston
THE CAUSES OF POVERTY
POLICIES TO ALLEVIATE POVERTY AND REDISTRIBUTE INCOME
ACTIVITY 4: Complete the crossword on page 401, focusing on key terms: