What is Absolute Poverty?
This describes a situation where income levels are so low that a person cannot afford to meet their basic human needs and risk losing their life. The World Bank has set international poverty levels at $1- $2 per day.
When you are describing absolute poverty, you can think about 4 main things:
2.Access to clean water
4.Access to basic healthcare
Why is it important for an economy to solve absolu
· -Lose of the workforce (labour): If there are decreasing numbers of workers in an economy there will be less economic growth as labour is needed as part of the production process.
· -Spread of disease: Without basic healthcare, a disease can spread very quickly which leads to a decrease in the population and also creates instability within the country.
· - Lack of Foreign Direct investment (FDI): MNC’s will be unlikely to invest in a country with an unstable workforce but also where there is a high probability that their own workers will catch diseases.
What is Relative Poverty?
This describes those who are considered poor relative to the rest of society. You could measure this by calculating the % of the population living below 60% of the median income. However, this method means that poverty is subjective and will change over time. It also means that you cannot compare different countries. Relative poverty rises from inequality.
Why is it important for an economy to solve relati
· -Those with the lowest living standards will be unlikely to have the ability to work. This lowers the labour supply to the economy.
· - Inequality (when a high percentage of people live in relative poverty)is a sign of an unbalanced economy. For living standards to rise the income needs to be distributed among the population.
· -High levels of inequality may lead to social unrest. This is bad for the economy as it deters internal and external investment.