Poverty (Years 8–11) — Economics

Absolute poverty means lacking basic needs; relative poverty means being poor compared to others; both have causes, effects and possible remedies including charity and zakat.

Poverty means being unable to reach a decent standard of living. Economists separate two kinds: absolute poverty and relative poverty.

Why this matters Poverty is not only a hardship for those who suffer it; it wastes human talent, holds back whole economies, and is one of the great moral concerns of every society and faith.

Absolute and relative poverty

Absolute poverty is being unable to afford the basic necessities of life: enough food, clean water, shelter, clothing and basic healthcare. It can be measured against a fixed line, such as a low daily income.

Relative poverty is being poor compared with others in the same society. Someone may have their basic needs met yet still fall far below the average standard around them, for example a child who cannot afford what most classmates have. As a country grows richer, the relative poverty line usually rises too.

The further the actual curve bows away from the diagonal line of perfect equality, the greater the inequality - and the more people fall into relative poverty.

Causes of poverty

unemployment or low-paid, insecure work;
poor education and lack of skills;
ill health or disability that limits earning;
war, conflict or natural disasters;
old age, or a family losing its main earner.

Effects of poverty

Poverty can trap people. Low income leads to poor health and less schooling, which lowers future earnings, keeping the next generation poor too. This is called the poverty cycle or poverty trap.

Common exam mistake: confusing absolute and relative poverty. Absolute poverty is measured against a FIXED standard (can basic needs be met at all?); relative poverty is measured against OTHERS in the same society and can persist, or even rise, even as a country gets richer overall.

Put these steps in order to show how the poverty cycle can trap a family across generations:

A family has low income
Children receive less schooling and healthcare
Children grow up with fewer skills and qualifications
They can only find low-paid work as adults
Their own children face the same low income

Policies to reduce poverty

creating jobs through economic growth;
education and training to raise skills and wages;
a minimum wage to lift the lowest pay;
benefits and progressive taxes to redistribute income;
free or cheap healthcare and schooling.

Alongside government action, charity plays a large role. In many communities, giving to those in need is a duty. In Islam, zakat is an obligatory annual charity, and sadaqah is voluntary giving; both channel wealth from those who have surplus to those in hardship, easing poverty and strengthening community bonds. Charity and good policy work best together.

Exam technique: when asked for policies to reduce poverty, name TWO different types of solution - a government policy (e.g. minimum wage, benefits) AND a non-government channel (e.g. charity, zakat) - showing you understand poverty is tackled from more than one direction.

It is important to discuss poverty with respect. People are rarely poor through fault of their own; far more often the causes lie in circumstances beyond their control, such as illness, disaster or the loss of a job. Treating those in poverty with dignity, while tackling the real causes, is both fairer and more effective than blame.