What is Poverty and Inequality?

Poverty and inequality exists and about one billion people are still wallowing in extreme poverty conditions while the inequality between them and the affluent is becoming deeper. Poverty is measured by the number of people living on less than $1.25 per day. The present economic crisis added to the food crisis in some countries has only served to deepen poverty and add more to the numbers.

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The Millennium Development Goals of reducing the number of poor by half before 2015 has become an impossible dream, although there is a slight reduction from 1.8 billion to 1.4 billion in the years 1990-2005 whereas it is predicted to cross 2 billion by 2015 by the UN MDG report. But the statistics hides the fact that the poverty and inequality are still persistent in some areas like sub-Saharan Africa and decreasing in regions such as East Asia, helped by the prosperity of China and some of its neighbours.

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Poverty and Inequality in the UK

It is disturbing to note that poverty and inequality is increasing in the UK. The government of UK releases an annual report about the distribution of income among its people. One part of the statistics in this report is about HBAI or the “Households Below Average Income”. This gives us a lot of information about the poverty, inequality and the average income of households in the UK. For instance, the 2002 report demonstrated a strong annual growth in the income levels and living standards. The situation is rather grim in the latest data: the average income levels have fallen drastically and the inequality has also fallen dramatically. However, the poverty line is also lower, but it has to be remembered that the average income is less and the poor are actually poorer than before. The reasons for this fall in the income and increasing inequality could be attributed to the present economic crunch that is prevalent worldwide.

How Poverty and Inequality are measured

To measure Poverty and Inequality, the main data collected is the net income of the household that is calculated using equivalisation according to the number of members and the composition of the household. The net income is derived from the total income of the household including pensions, benefits and any tax credits and applying the equivalence scale so that the distribution of the income among the individuals and the standard of living of the household can be calculated.

How can Poverty and Inequality be reduced?

Poverty and Inequality reduction relies on the inter-linkages between economic growth, social policy as well as politics. It is usually assumed that a robust economic growth can reduce poverty and inequality because the benefits would ultimately reach the poor. However, in actual fact, this rarely happens. Reduction of Poverty and Inequality would need a major overhauling of the macroeconomic policies and bring in appropriate changes in the structural and institutional spheres, leading to the creation of a lot of employment opportunities. This can be successful only in an environment that has the strong involvement of the citizens working together with the state in a democratically directed system.

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