Lecture notes 3.6.1 Poverty & Inequality

3.6.1 Poverty & Inequality

 Absolute poverty
o People can't afford necessities
 Food
 Water
 Shelter
 Education
 Clothes
o Less than $1.90 a day means you are in absolute poverty
 Relative poverty
o Poverty in relation to the area you live in
o If your income is 60% less than the average income
o Can't afford goods that are socially norm
 Fridge
 Mobile phone
o Causes of relative poverty
 Higher salaries have more income growth than people on lower salaries
 Measures of Poverty
o HPI
 Human poverty index
 Measures Life expectancy
 Education
 Ability to meet basic needs
o HPI 1
 Measures the probability of living to 40
 Measured Adult literacy rate
 Measure % of underweight children
 Measure % of people not using improved water sources
o HPI 2
 Measures the probability of living to 60
 Measures % of adults who do not have literacy skills
 Measures poverty if you earn 50% below median income
 Inequality
o Wealth & income is distributed in an unequal manor
o Causes
 Different level of wage
 Traps you as you can't save
 Wealth levels
 Earn rent and interest on assets to increase income
 Chance
 If assets in right place could be more valuable
 Given money in a will
 Age