INEQUALITY AND POVERTY

Inequality
What is Inequality?

Inequality or economic inequality refers to the difference between the rich and poor, the have
and have-nots – it is shown by people’s different positions within the economic distribution –
wealth, pay and income. Inequality is large in a society where few people own a
disproportionate amount of the economic pie.

Inequality studies may also examine the difference between various socioeconomic groups in
society, such as working class and poor households versus people with a university degree, or
men versus women.

The term refers to the unfair situation in society where some individuals have considerably
more money, access to education, opportunities, etc. than others.

For as long as anybody can remember, economists have been debating whether economic
growth creates less or more equality, and whether equal societies grow more or less slowly than
unequal ones.

What does inequality mean? Cambridge.Dictionary.org, defines inequality as follows:

“The unfair situation in society when some people have more opportunities, money, etc. than
other people.

The Economist says that one of the problems is to agree which type of inequality matters the
most – equality of income (outcome) or of opportunity. Then there is the problem of measuring
it.

Three Types of Inequality

According to equalitytrust.org.uk, there are three main kinds of inequality – income, pay and
wealth:

Income Inequality: refers to how unevenly income is distributed in society.

Income is not the same as pay. Income includes all the money people receive from employment
– wages, bonuses, salaries, etc. – plus investments, state benefits, rent, and pensions.
Economists and sociologists may measure income on a household or individual basis. Gross
income is what we receive before tax, while net income is what we are left with after taxes and
insurance contributions have been paid.

Income distribution looks at the incomes of different socioeconomic groups in a country,

industry, or company.

Pay Inequality: refers just to payment from employment, and includes bonuses and overtime. It
can be based per hour, per month or per year.

The pay gap is the difference in pay between one group of people and another, either within
one company or across a whole city, region or nation.

Wealth Inequality: all our assets, everything we possess, is our wealth. A person’s or
household’s wealth includes all their financial assets, such as stocks or bonds, private pension
rights, property, etc.

Poverty
What Is Poverty?

The word poverty provokes strong emotions and many questions. In the United States, the
official poverty thresholds are set by the Office of Management and Budget (OMB). Persons
with income less than that deemed sufficient to purchase basic needs—food, shelter, clothing,
and other essentials—are designated as poor. In reality, the cost of living varies dramatically
based on geography; for example, people classified as poor in San Francisco might not feel as
poor if they lived in Clay County, Kentucky. I define poverty as a chronic and debilitating
condition that results from multiple adverse synergistic risk factors and affects the mind, body,
and soul. However you define it, poverty is complex; it does not mean the same thing for all
people. For the purposes of this book, we can identify six types of poverty: situational,
generational, absolute, relative, urban, and rural.

1. Situational poverty is generally caused by a sudden crisis or loss and is often temporary.
Events causing situational poverty include environmental disasters, divorce, or severe
health problems.
2. Generational poverty occurs in families where at least two generations have been born
into poverty. Families living in this type of poverty are not equipped with the tools to
move out of their situations.
3. Absolute poverty, which is rare in the United States, involves a scarcity of such
necessities as shelter, running water, and food. Families who live in absolute poverty
tend to focus on day-to-day survival.
 4. Relative poverty refers to the economic status of a family whose income is insufficient to
meet its society's average standard of living.
5. Urban poverty occurs in metropolitan areas with populations of at least 50,000 people.
The urban poor deal with a complex aggregate of chronic and acute stressors (including
crowding, violence, and noise) and are dependent on often-inadequate large-city
services.
6. Rural poverty occurs in nonmetropolitan areas with populations below 50,000. In rural
areas, there are more single-guardian households, and families often have less access to
services, support for disabilities, and quality education opportunities. Programs to
encourage transition from welfare to work are problematic in remote rural areas, where
job opportunities are few (Whitener, Gibbs, & Kusmin, 2003). The rural poverty rate is
growing and has exceeded the urban rate every year since data collection began in the
1960s. The difference between the two poverty rates has averaged about 5 percent for
the last 30 years, with urban rates near 10–15 percent and rural rates near 15–20
percent (Jolliffe, 2004).

Poverty and It's Effects to the Economy

According to Walter Fischer ...

"Poverty affects a nation’s economy in several ways. Because, by definition, that portion of a
nation’s population living below the poverty line has little money to spend, there is less demand
for many goods than might otherwise be the case. That adversely affects the supply-side of the
economic equation, which means less money paid to others to produce, distribute and sell.
Poverty also adversely affects a nation’s economy by diverting government revenue towards
programs oriented..."

HOW IS INEQUALITY RELATED TO POVERTY AND DEVELOPMENT?

Development, poverty and inequality are different although intrinsically connected concepts
and they all have an impact on people’s well-being. Human development, poverty and
inequality are all essentially multidimensional and people-centered concepts. They all focus,
although in different ways, on people’s capabilities having an ultimate impact on people’s well-
being. Human development involves expanding the set of capabilities; poverty refers to the
deprivation of capabilities, while inequality entails people having different abilities to choose
and different freedoms.

Studies have shown that extreme poverty slows economic growth more severely than income
inequality itself. Extremely poor people are unable to receive or buy the education required to
enable them to raise their standard of living. Very poor people’s children typically have to miss
school in order to earn money.
Development is nowadays described as expanding people’s freedoms, where freedoms entail
the worthwhile capabilities people value, and empowering people to engage actively in
development processes on a shared planet (Alkire, 2010). Capabilities are understood as the
actual ability to achieve something. For instance, the capability to enjoy healthcare requires a
health clinic with staff and medical supplies, and that patients are not refused treatment due to
gender, race, age, or religion reasons.

The understanding and measurament of development shifted from one dimension, i.e. income,
to multiple dimensions, i.e. capabilities and freedoms.

And for that we can say that inequality is related to poverty and development because if there's
always an inequality, people, society or economy will not develop that will may lead to poverty.

References / Sources:
http://www.ascd.org/publications/books/109074/chapters/Understanding-the-Nature-of-
Poverty.aspx

https://www.enotes.com/homework-help/how-poverty-affect-countrys-economy-785753

https://www.google.com/amp/s/marketbusinessnews.com/financial-glossary/inequality-
definition-meaning/amp/

https://www.google.com/amp/s/www.bbvaopenmind.com/en/articles/poverty-inequality-and-
development-a-discussion-from-the-capability-approach-s-framework/amp/
INEQUALITY
and
POVERTY
Reporters: Group 3
Alleah Jhyn Abid
Jhon Paul Halaman
Zyrene Jade Broncano
Devie Jane Muesco