POVERTY

Absolute poverty: a condition where people’s income is too low to enable

them to meet their basic needs.
Relative poverty: a condition where people are poor in comparison to
others in the country. Their income is too low to enable them to enjoy the
average standard of living in their country.

MEASURE OF POVERTY
Multidimensional Poverty Index (MPI): a measure of poverty based on
deprivations in education, health and standard of living.
Possible government policy measures to reduce poverty
1. Improving the quantity and quality of education.
2. Promoting economic growth. For example, increasing government
expenditure or reducing the rate of interest, will increase aggregate
demand. This can increase output and create jobs.
3. Introducing or raising a national minimum wage.
This can be of help in that: low-paid workers may be better paid, giving
higher income may enable people to buy basic necessities and reduce
absolute poverty. The pay gap between high-income and low-income
workers may be reduced, lower relative poverty. Also, higher pay may
increase spending, creating more jobs and income. Higher tax revenue may
enable the government to spend more on reducing poverty .
However, it may result in some workers losing their jobs as a result of not
being paid which will bring about lower income. It may discourage MNCs
operating in the country. It does not help people who are poor because of
age, unemployment or sickness. Lastly, it may result in inflation, leaving
purchasing power/real wages unchanged.
4. Encouraging more multinational companies to set up in the country.
5. Providing benefits or more generous state benefits.