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Absolute and Relative Poverty


EXPLAIN AND EVALUATE THE CAUSES OF RELATIVE POVERTY IN UK (INEQUALITY)

People are considered to be in relative poverty if they are living below a certain income threshold in a particular country.

One of the factor leading to relative   poverty may be Inequality in Wages and Earnings Growth. Workers with high levels of skills and qualifications will be in demand and therefore will be able to gain higher wages. However those with low skills will find themselves in low paid jobs or even unemployed. In recent years wage differentials have increased mainly due to Deindustrialization leading to more service sector jobs which tend to be lower paid and   Decline of trades unions leaving many workers unable to bargain for higher wages.
UK has also experienced an Increased demand for highly skilled workers


Another factor can be Falling Relative value of State Benefits. Pensions and other benefits are index linked (this means rising in line with inflation) This tends to be less than wages which increase faster than inflation. Therefore those dependent on benefits will lag behind other members of society E.g. 1.3 million pensioners are totally reliant on state pension.

Moreover, Higher levels of Structural and Long term Unemployment is the biggest cause of poverty in the UK because people rely only on benefits. In UK 65% of the poor are not in work. In the 1980s and early 1990s unemployment was high, however in 2003 it has fallen below 1 million (UK claimant count) But increased again in 2009, 2010.

Furthermore   Tax changes in the 1980s and 1990s have put a higher burden of tax on the poor. There has been a shift in taxes from progressive income tax to regressive, indirect Taxes, therefore causing an increase in inequality.   For Example the top marginal rate of income tax has fallen from 83% in 1979 to 40% in 1989. The basic rate has come down form 33% to 22%.
However the overall tax burden has remained unchanged...

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