• Absolute poverty?is a situation where?individuals cannot afford?to acquire the?basic necessities?for a healthy & safe existence
  • These necessities include shelter, water, nutrition, clothing & healthcare
  • In 2022, the?World Bank?defined absolute poverty as anyone who was living on less than?$1.90 a day
  • Absolute poverty is more prevalent in?developing countries?than developed ones
• Relative poverty?is a situation where household income is a certain percentage less than the median household income in the economy
  • Poverty in a household is considered relative to?income levels?in other households
  • The UK defines relative poverty as households that are living with less than 60% of the?median household income
  • In May 2022, the median UK monthly household income was ￡2072/month
    • This meant that the?relative poverty line?was any household earning less than ￡1243,20/month
  • In early 2022, 22% of the UK population was in relative poverty
  • Relative poverty is the main form of poverty that occurs in?developed?countries

• There has been a?significant decrease?in absolute poverty since 1990
  • There were 1.9 billion people in absolute poverty in 1990. By 2022 it had fallen to 750 million
• Absolute poverty can decrease even while?income inequality?increases
  • This means that the income of wealthier households is rising faster than the income of the poorer households
• A reduction in absolute & relative poverty requires the benefits of both the workings of the?free market?&?government intervention

Causes of changes in absolute poverty

• There is a strong correlation between?economic growth?& a decrease in absolute poverty
  • Economic growth increases household incomes
• Government tax & benefit policies?can support the most vulnerable groups in society e.g. children, pensioners, people stuck in long-term unemployment
  • In developed economies, benefit policies can ensure that no household is living in absolute poverty

Causes of changes in relative poverty

• Rising?asset prices?can decrease relative poverty in households which own their own?properties
  • Asset prices often increase faster than wages or income
• Trade liberalisation?increases?potential market size?& output in an economy
  • This leads to an increase in the demand for labour & a wage rise
  • This creates?additional income?which has a?multiplier effect?& pulls households out of relative poverty
• Decreased levels of?government benefits?can lower household income & increase relative poverty