1. Poverty and Inequality

2. Poverty
According to the World Bank, “poverty is pronounced deprivation in wellbeing.”
Absolute poverty is defined by the UN as “a condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services.” Extreme poverty defined by World Bank as $ per day (2005 prices PPP), and poverty as $2 per day.

3. Absolute poverty
World Bank defines extreme poverty as less than $1.25 per day (measured in 2005 PPP dollars), and poverty as $2 per day
Extreme poverty has “decreased considerable” in the past 30 years, from 52% of the developing world in 1981 to 21% in 2010 (World Bank)
Extreme poverty has fallen in all regions, but only marginally in Sub- Saharan Africa – as a result of a fall in the last decade.
Poverty in China has fallen from 84% to 12% (think of this and use in questions on globalisation)

4. Causes of absolute poverty (developing countries)

5. Absolute poverty
Why is absolute poverty falling? Where is it falling fastest? Where is it still entrenched?

6. Poverty levels in your chosen countries?
Evaluate the causes of absolute poverty in a developing country of your choice. (25)

7. Relative Poverty
Relative poverty defines income or resources in relation to the average.
It is concerned with the absence of the material needs to participate fully in accepted daily life.
How is it measured?
Relative poverty is generally defined as when household income is less than 60% of median household income

9. Wealth Inequality in America
Wealth relates to differences in people’s stock of assets.
Income is a flow concept; therefore, income inequality relates to differences in people’s income flows from wages, dividends, rents, etc.
Remaking the Middle Kingdom: China
Wealth Inequality in America

10. Oxfam says wealth of richest 1% equal to other 99%
The richest 1% now has as much wealth as the rest of the world combined, according to Oxfam.
It uses data from Credit Suisse from October for the report, which urges leaders meeting in Davos this week to take action on inequality.
Oxfam also calculated that the richest 62 people in the world had as much wealth as the poorest half of the global population.
It criticised the work of lobbyists and the amount of money kept in tax havens.
Oxfam predicted that the 1% would overtake the rest of the world this time last year.
It takes cash and assets worth $68,800 (£48,300) to get into the top 10%, and $760,000 (£533,000) to be in the 1%. That means that if you own an average house in London without a mortgage, you are probably in the 1%.
BBC News: 18 January 2016

11. Causes of Inequality Earned income Non workers
Physical and financial wealth

12. Causes of Inequality Household composition Government policy
The degree of competition in product markets

13. Kuznets Curve
The Kuznets curve is a hypothetical curve that graphs economic inequality against income per capita over the course of economic development

14. News of the day
What does the Joseph Rowntree organisation do?
What are there recent findings?
What do they argue causes poverty in the UK?
What are the costs?
Discuss the causes of relative poverty in a developed country of your choice (15)

15. 200 years in 4 minutes
Changing your view on poverty
The washing machine
World Bank – living in poverty

16. Inequality Measure using Lorenz curves and Gini coefficient
Can measure inequality in income, or in wealth
Any difference between UK and US?

17. Causes of income inequality (UK)
Unemployment
Wage differentials:
More qualified earn more because productivity is higher so MRP is higher
Older workers (but not ancient!) tend to earn more because they have more experience and thus higher productivity/MRP.
Can certainly think of this in terms of career progression within an organisation
Because some skills are in short supply
Can apply in professions like actuaries, medicine, but also with eg top footballers

18. Causes of income inequality
Wage differentials. Other reasons:
Discrimination (though illegal in the UK)
Net returns from work
Some jobs are so rewarding that workers accept lower wages. Examples….
Regional differences
Different jobs (eg financial services London) but also different cost of living

19. Causes of income inequality
Changing structure of economy
Advances in technology mean higher skills are needed
Shifting demand means those with IT skills/transferable skills can earn more
Wealth
One of the biggest causes of inequality since wealth is a source of income

20. Causes of wealth inequality (eg UK)
Inheritance
Biggest factor (Inheritance tax is 40% on the value of an estate over £325,000 or over £650,000 from a couple)
Income
Assets tend to build up during a person’s working life as people buy property and build assets for retirement
Hard to redistribute assets
No asset taxes in the UK (aside from inheritance tax and arguably stamp duty)
Even with an asset tax it is hard to give assets to the poorer

21. Causes of (relative) poverty
Unemployment, particularly long term
Lack of education and skills, which leads to
unemployment (see above), particularly with changing structure of the economy from manufacturing to services
Lower income than high skilled workers (who have higher MRP, ie produce more)
Single parenthood
Ageing population
People may not have saved enough for a longer retirement

22. Government policy to alleviate poverty (and inequality) in the UK
Remember poverty is defined as relative
very difficult to see it being eliminated without a very equal distribution of income. Would this be desirable?
Main policies
Redistribution of income
Progressive taxes (higher top rate, raise personal allowance so fewer pay tax)
Means tested benefits – tax credits for poorer households, job seekers allowance for unemployed
Universal benefits – education and health free for all, state pensions
Minimum wage

23. 200 years in 4 minutes
Changing your view on poverty
The washing machine
World Bank – living in poverty

24. Ageing
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