The poverty trap affects people living in households on low incomes. It creates a disincentive to look or work longer hours because of the effects of the income tax and welfare benefits system.
A worker may get given the opportunity to earn a extra £60 a week by working 10 more hours. This boost to their gross income is reduced by an increase in income tax and national insurance contributions.
They may lose some income related welfare benefits and the combined efffecs of this might be to take away over 70% of a rise in income,leaving little in the way of extra net or disposable income.
When you also add in extra costs of more expensive transport charges and the cost of arranging child care, then the disincentive to work may be quite strong.
There are two kinds of poverty:
- In short it refers to a condition where a person does not have the minimum amount of income needed to meet the minimum requirements for one or more basic living needs over an extended period of time. This includes things like:
- Therefore meaning it measures the number of people living below a certain income threshold or the number of household unable to afford certain basic goods and services
- What we choose to include in a basic acceptable standard of living is naturally open to discussion
- It includes things like :
- Food:Adults who have a body mass index that is below 17, or children who are over three standard deviations below a certain age/weight/height criteria
- Safe drinking water:Having to use surface water (i.e. rivers or streams), or having to spend at least 30 minutes to collect water from some source
- Sanitation facilities:Lack of access to any type of toilet facility
- Health:Lack of access to any type of health care, including immunizations, prenatal care, or treatment for serious illnesses
- Shelter:Kids who live in places where there are more than four people to a room, adults who live in places with more than three people to a room, or adults and children who live in places with no floors
- Education:School-age children who have not in the past or are not currently in school, or adults who have not attended school and cannot read or write
- Information:Lack of access to any type of media, including radio, television, or computer
- Access to services:Lack of access to schools, health services, etc.
- Living in absolute poverty is harmful and can endanger your life. The standards set for absolute poverty are the same across countries. When it was established in 1990, the World Bank set the global absolute poverty line as living on less than $1 a day
- Relative poverty is the condition in which people lack the minimum amount of income needed in order to maintain the average standard of living in the society in which they live.
- Therefore meaning it measures the extent to which households financial resources falls below an average income level
- Although living standard and real incomes have grown because of higher employment and sustained growth, Britain has become a more unequal society over the last 30 years
- Relative poverty is considered the easiest way to measure the level of poverty in an individual country. Relative poverty is defined relative to the members of a society and, therefore, differs across countries. People are said to be impoverished if they cannot keep up with standard of living as determined by society.
- Relative poverty also changes over time. As the wealth of a society increases, so does the amount of income and resources that the society deems necessary for proper conditions of living.