poverty - types and causes

• What is a common criticism of free labor markets regarding income?

  They can result in significant income inequality
• What do many argue about significant income inequality and poverty in free labor markets?

  They are unfair and sources of failure
• What are the two main ways poverty can be examined?

  Absolute and relative
• Where is absolute poverty more commonly found?

  Developing countries
• What is absolute poverty defined as?

  Incomes below a threshold for basic goods
• According to the World Bank, how much do those in absolute poverty live on?

  Less than $2 a day
• What is relative poverty defined as?

  Income less than a given average
• Which countries are more likely to see relative poverty?

  Developed countries
• What fundamental concept underpins the topic of poverty?

  Equity versus equality
• What does equity mean in economics?

  Fairness in income distribution
• What does equality mean in economics?

  Equal distribution of income
• What does horizontal equity mean?

  Equal treatment of equals
• If two individuals earn the same income, how would they be taxed under horizontal equity?

  Exactly the same
• What does vertical equity mean?

  Higher earners pay higher tax rates
• What is one of the biggest causes of poverty?

  Unemployment
• What type of unemployment occurs in a recession?

  Cyclical unemployment
• What type of unemployment is caused by a mismatch of skills?

  Structural unemployment
• What happens to many workers during a recession due to lack of demand?

  They lose their jobs
• What happened to the UK economy since the 1970s?

  Significant restructuring
• What kind of industries did the UK move away from?

  Heavy industry and manufacturing
• What kind of industry did the UK move towards?

  Service sector
• What may happen to workers who used to work in manufacturing?

  May not have transferable skills
• What happens if structurally unemployed workers don't get training?

  They may remain trapped in poverty
• What argument becomes strong with long-term unemployment?

  The hysteresis argument
• What can poor education and skills lead to?

  Poverty and potentially long-term poverty
• How can poor health and healthcare affect someone's economic situation?

  Limit productivity and earning potential
• What do poor health/healthcare and poor education/skills lead to?

  Low productivity, low wages, poverty traps
• How do wage differentials affect poverty?

  Bigger differentials increase relative poverty
• What is a form of "bad luck" that can cause poverty?

  Being born into poverty
• What does evidence suggest about being raised by a single parent?

  Lower earning potential is likely
• What can tax cuts for the well-off lead to?

  Increased relative poverty
• What is the current higher income tax bracket in the UK?

  45%
• What happens when high earners get an automatic boost to their incomes?

  It increases the divide between rich/poor
• What can the culture of raising children to work on farms lead to?

  Significant poverty
• Why can subsistence agriculture lead to poverty?

  It prevents value of education being realised
• What type of economies can lead to poverty traps?

  Dominant agricultural based
• In the UK, what income level is the 45% tax rate applied to?

  More than £150,000