Economics Essay Example | Topics and Well Written Essays - 1000 words

Economics - Essay Example It can also be the number of households which are unable to afford basic goods and services. Relative poverty is another dimension used to define poverty. It measures the extent to which the financial resources of households fall below an average income threshold (Measuring poverty. 2010). In other words absolute poverty can be defined as poverty where people cannot afford basic things that is necessary for living due to fall in income below the prescribed level. Whereas when income falls below the standard limit or average level by a certain amount, the situation is called as relative poverty (Relative and Absolute poverty. 2010). The living standards as well as real incomes of individuals and households have grown substantially due to increased employment chances and sustained economic growth in recent years. However the income that is distributed among the population is totally uneven. This is the reason for both absolute and relative poverty. Even though the British society has b ecome a developed one, recently studies have forecast that Britain has become a more unequal society since the last twenty five years. Inequality started its development from the rule of the labour government in 2001. There are many reasons for absolute and relative poverty in Britain. ... It depends on how you can confront them. This is not the case for absolute poverty where the main cause is purely economical. In western society, absolute poverty is not prevailing but there is relative poverty especially among the working class (Measuring poverty. 2010). Answer:2 Introduction: Reduction in inequality and poverty as well as promoting equity is considered as important macro economic objectives. In UK the widening gap between the rich and the poor has highlighted the importance of understanding the causes of relative and absolute poverty. It has also prompted to construct adequate policies for reducing the poverty and narrowing the income gap (Numbers in low income. 2009). One of the best ways to reduce the gap between the rich and poor thereby reducing the effect off poverty is to redistribute the wealth to the needy. For this purpose the government can use the tax and benefits system whereby they can intervene to promote equity as well as reduce inequality and relati ve poverty. This can be done through the tax and benefits system in which a progressive tax and benefits system is implemented that takes more tax on higher levels of income and redistributes it as welfare benefits to those who are in lower income groups. The original income can be adjusted in different ways so that it increases or decreases the post tax income. One among the benefits that can be provided to the poor is the cash benefits system. This is designed to help those who have zero income. This includes contributory as well as non contributory benefits. Contributory benefits include pensions, job seekers allowance, contributions of employers to national insurance fund and non contributory benefits include housing benefit, income supports, carers’ benefits as