Causes of poverty

Causes of absolute and relative poverty

Causes of Absolute Poverty

The causes of absolute poverty include:

  • World population increase:This leads to problems with inadequate housing and food shortage.
  • Natural disasters, i.e. tsunamis and hurricanes:They can destroy entire communities, cause a shortage of food and medication, and damage infrastructure.
  • Conflict:Instead of spending money on education, agriculture, or health, countries in wars spend most of their money on weapons and machinery. Entire countries can be destroyed by advanced weaponry, and many citizens are forced to flee and become refugees.
  • Debt:An example of this is Zambia, an African country, that spends 34 times more repaying debt than it did on education. As a result, many of Zambians did not get the education that they needed, resulting in absolute poverty


Causes of relative poverty-

  • Unemployment:From 2010-2014, the unemployment rate in the United States was over eight percent. This means that over 18 million Americans over the age of 16 did not have jobs. This lack of employment increases your chances of living in poverty.
  • Education:The less education you have, the higher your chances of being unemployed, which in turn increases the likelihood that you will live in poverty.
  •  Poor health:Poor health is not only a cause of poverty, but it is also a consequence of poverty. People living in poverty suffer greater levels of physical and mental illness than those who do not. Poor health also weakens impoverished communities, which prevent many people from working and earning an income. For example, an infectious disease may spread across an impoverished community, killing many. Since these communities do not have access to adequate health care services, they cannot be treated and the cycle of poverty continues.
  • Lack of access to affordable services:Affordable services, such as low-cost child care and affordable transportation to and from work, are essential in preventing and reducing poverty, especially among families with limited income. Without access to affordable services, some people will not be able to fully participate in social, academic and occupational activities. This in turn can lead to poverty.
Government Policies

How Government policies can be implemented


Regressive tax is when everyone pays the same levels of tax, and there are no bands for different levels of tax. The burden of regressive taxes are on people of a lower income.

Progressive tax is where the average rate of tax rises as income rises. I.e. the proportion of your income taken in tax rises as you become richer. This

Trickle down effect-

A theory that states when income rises, so will the consumption of the richer people; meaning that there is a high demand for goods and services, so employment increases i.e. industrial revolution; however we are increasingly seeing the rich becoming richer, as their investments are becoming more financially attractive to them, for example investment in property or shares, and not consumer goods. In conclusion, although we may see an increase in jobs from high levels of consumption from richer people; leading to increased disposable income for the people providing their labour for these jobs, the rich are still benefiting at much greater margins in comparison to people of a lower income. The effectiveness of this theory is questionable, as wealth is increasingly being stored among the rich.

Although the trickle down effect isn’t explicitly a Government policy; it can be influence through the rates of tax on people of a higher income.


What are the two kinds of poverty?

There are two kinds of poverty:

Absolute 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- 

  • 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.

What is poverty?

  • Hunger
  • Lack of shelter
  • Being sick and not being able to see a doctor
  • Not having access to school
  • Not having a job
  • Fear for the future, living one day at a time
  • Losing a child to illness due to bad health
  • Powerlessness
  • Lack of representation
  • Lack of freedom
Inequality basics

Inequality basics

Income is a flow of money, for example paid a wage in return for working.

Wealth is a stock of money, for example shares, bonds or property.

Transfers are a redistribution of income into the market system.

Inequality is the inconsistency of social issues; such as wealth, income, race and gender.

Key inequality facts.

China and India make up 30% of the population, but only have 8% of the wealth of the global economy.

Industrialisation has made the poor better off, however it is the rich who have benefitted exponentially.

Technological advances have amplified inequality, as firms have become more capital intensive by laying off labour, due to lower costs.

The UK has the highest levels of inequality in the EU.