Relative poverty– This type of poverty is related to the average incomes of people in an economy. This is where an income is less than the average income by a certain amount, for the UK this is 60%. So a household is considered to be in relative poverty if their household income is below 60% of the UKs average household income.
Absolute poverty– This type of poverty is again adjusted to different countries. Anyone who earns an income below a certain threshold necessary to maintain minimum standards of living. For example, having enough money to buy the necessities; food shelter and heat. For many third world countries this would be about $1-$2 a day. However, the cost of living is much higher in the UK so the threshold would be much higher.
Causes of poverty
In the UK poverty is mostly relative rather than absolute. There are three main causes of relative poverty in the UK:
- Old age and poverty– many old people rely on a state pension rather than a private one. Before the 1980s the state pension rose according to the rise in annual earnings, meaning that pensioners shared the increase in national prosperity coming from economic growth and overall higher real earnings. However, this moved to a different system where the pension rose in accordance to inflation(RPI) this meant that while peoples incomes where rising at a faster rate than inflation the pensioners where becoming increasingly worse off in comparison to them, effectively keeping their incomes at the same as it was in the 80s. this changed in 2011 to a system in which the pension rises in relation to Earnings, inflation or 2.5% whichever is highest.
- Unemployment and poverty– Unemployment benefits are generally lower than the wages that people earn prior to losing their job, so an increase in unemployment would therefore bring about an increase in relative poverty. In an effort to reduce government spending the government have put a limit on the amount of benefits a person aged 16-64 can claim, this could also result in a rise in relative poverty. However, this can be helped with the fall in unemployment that we are experiencing. With absolute poverty this can be it can best be combated through fast and sustained economic growth.
- Low wages and poverty– there is a correlation between low waged and relative poverty and the unwaged and absolute poverty. There is a mass amount of low waged people in the UK who are in unskilled jobs whether it is due to a lack of education or its due to a closure in their industry such as the coal miner’s or its due to their being a shortage of skilled jobs. The low waged poor are almost always relatively poor rather than absolutely poor. The National minimum wage was brought in in order to reduce poverty in the low waged people.
Effects of poverty in the UK
- Educational deprivation– The Child Poverty Action Group(CPAG) believes that children who come from a poorer background are behind at all stages of education with the gap increasing as they grow older. They believe that at:
-The age of 3 a child from a poorer background is estimated to be on average 9 months’ behind
– At the end of primary school pupils receiving free meals are almost 3 terms behind their wealthier peers.
– This grows to 5 terms at the age of 14
– By 16 the children on free school meals are achieving 1.7 grades lower at GCSE on average.
- Health deprivation– the CPAG also argues that poverty is associated with a higher risk to illness and premature death.
– children born in the poorest areas weigh on average 200grams less than those born in the richest areas
– children born into low income families are more likely to die at birth or in infancy.
– More likely to suffer a chronic illness during childhood or to have a disability.
– All this has an impact on life expectancy. Professionals live on average 8 years longer than unskilled workers.
- The effect of poverty on communities– children living in poverty are twice as likely to live in bad housing which can have significant effects on physical and mental health. With parents having to make choices between heating and food. As well as children poverty also effect other parts of society. For example fuel prices are ensuring that pensioners can’t afford to heat their homes which leads to an increase in illness, this coupled with the UKs aging population results in an overcrowding in hospitals and therefore a strain on the NHS. This would lead to an increase in government spending to compensate for the extra demand resulting in the deficit in the budget increasing