Absolute poverty refers to a lack of basic necessities such as food, clothing, and housing, essential for survival. It is often measured by a fixed threshold, such as living on less than $1.90 per day.
Relative poverty, on the other hand, is being poor in comparison to others within a society. It is measured in relation to the average income of a country, such as earning less than 60% of the median income, which restricts individuals from fully participating in normal societal activities.
5.2.2 Causes of Poverty
- Unemployment: Lack of jobs leads to no income, pushing people into poverty.
- Low Wages: Insufficient earnings prevent individuals from meeting their basic needs.
- Illness: Poor health can reduce a person's ability to work and earn a living.
- Age: Elderly individuals who lack savings or pensions may struggle financially.
5.2.3 Policies to Alleviate Poverty and Redistribute Income
Redistribution of income: It is the transfer of income from some individuals to others, typically through progressive taxation, where tax is taken from the rich and spent on the poor to reduce income inequality.
Following are the Policies to Alleviate Poverty and Redistribute Income
- Economic Growth: Creating more jobs and improving wages through investment and industrial development.
- Improved Education: Providing better access to education and skills training to increase employment opportunities.
- More Generous State Benefits: Welfare programs that support low-income individuals and families.
- Progressive Taxation: Higher tax rates on the wealthy to redistribute income and fund social programs.
- National Minimum Wage: Ensuring fair wages to prevent extreme poverty among workers.
Exam Tips
1. Define Key Terms Clearly: Make sure to clearly differentiate between absolute and relative poverty with definitions and examples.
2. Provide Examples: Use real-life examples such as developing countries for absolute poverty and developed countries for relative poverty.
3. Link Causes to Effects: When discussing causes, explain how each factor (e.g., unemployment, low wages) directly impacts poverty levels.
4. Explain Policies with Justification: When writing about policies, describe how each measure helps alleviate poverty and improves income distribution.
5. Use Data or Trends if Available: In long-answer questions, refer to relevant statistics or trends to strengthen your response.
Past Paper Example Question:
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Explain two causes of poverty amongst fishermen.
One cause of poverty amongst fishermen is low wages. Many fishermen earn insufficient income due to the high supply of workers and low demand for their services. As a result, they struggle to afford basic necessities such as food and proper housing, leading to poverty.
Another cause is unemployment, which can be both structural and seasonal. Structural unemployment occurs when the fishing industry declines, and fishermen lack the skills to transition into other jobs, making it difficult for them to find alternative employment. Seasonal unemployment also contributes to poverty, as fishing may not be possible during certain times of the year due to weather conditions or fishing restrictions, leaving fishermen without income for extended periods.
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Analyse Two Policy Measures to Alleviate Poverty
Governments implement various policies to reduce poverty and improve the living standards of disadvantaged groups. Two significant measures include increasing benefits and government employment creation schemes.
One effective policy measure is increasing benefits, which directly boosts the income of low-income individuals through government-provided financial support such as housing benefits, disability benefits, and unemployment benefits. By providing this financial assistance, governments enable the poor to afford basic necessities such as food, shelter, and healthcare, reducing the immediate effects of poverty. Additionally, benefits help prevent extreme poverty for those who are unemployed or unable to work due to disability or old age.
Another crucial measure is government employment creation schemes, which aim to increase job opportunities by expanding public sector employment and offering job search assistance. Governments can achieve this by funding infrastructure projects, creating public service jobs, and supporting industries that employ a large workforce. By doing so, more people gain stable employment, improving their earning potential and allowing them to break out of the poverty cycle. Furthermore, employment schemes often include training programs, equipping workers with new skills that make them more employable in the long term.
Both policies play a vital role in alleviating poverty, with benefits providing short-term financial relief and employment creation offering long-term solutions by ensuring individuals can sustain themselves through work. However, the effectiveness of these policies depends on proper implementation and funding, ensuring they reach those in need while maintaining a balanced economy.
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2(a)
Define redistribution of income.
Redistribution of income is the transfer of income from some individuals to others, typically through progressive taxation, where tax is taken from the rich and spent on the poor to reduce income inequality.
2(b)Explain two reasons why governments redistribute income.
One reason why governments redistribute income is to reduce poverty. By transferring income from higher earners to lower-income individuals through welfare benefits and public services, the government increases their purchasing power, enabling them to afford basic necessities such as healthcare, education, and housing. This helps improve the standard of living for the poor and reduces extreme financial hardship.
Another reason is that reducing poverty helps decrease social problems and prevent the waste of resources. Poverty is often linked to poor health, malnutrition, and reduced productivity, which can negatively impact a country’s workforce and economic growth. If people do not have access to basic needs, they may struggle to contribute effectively to the economy, leading to lower productivity levels. By redistributing income, governments can create a more economically stable and productive society while reducing long-term government expenditures on issues such as healthcare costs and crime prevention.
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Explain two ways a government could redistribute income from the rich to the poor.
One way a government can redistribute income is by taxing the rich through progressive taxation. Progressive taxes impose a higher tax rate on individuals with higher incomes, ensuring that the wealthiest contribute a larger portion of their earnings to government revenue. Additionally, reducing regressive taxation—which disproportionately affects lower-income individuals—can help ease the financial burden on the poor. By collecting more taxes from the rich, the government can fund social programs that support disadvantaged groups.
Another way is through government spending to benefit the poor. This can be done by providing free or subsidized healthcare, education, and welfare benefits. For example, free healthcare ensures that low-income individuals receive medical treatment without financial strain, while access to quality education helps them acquire skills needed for better-paying jobs, breaking the cycle of poverty. Additionally, the government can introduce policies to generate jobs for unskilled workers by investing in public infrastructure projects or encouraging businesses to hire through incentives. Implementing a minimum wage policy also ensures that workers earn a fair wage, making it easier for low-paid employees to afford basic necessities and improve their standard of living.
Both methods help reduce income inequality, improve economic opportunities for the poor, and create a more balanced society where wealth is distributed more fairly.
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