Poverty
Economic Development
People fall into poverty for several distinct reasons. The syllabus names five.
- Unemployment. Someone without a job has no wage income and must rely on benefits, which are usually well below average earnings. Long-term or structural unemployment is a leading cause of poverty.
- Low wages. Being in work does not guarantee escaping poverty. Workers in low-skilled, low-productivity or insecure jobs may earn too little to cover basic needs, especially where there is no minimum wage.
- Illness. Poor health stops people working, reduces the hours they can do and adds medical costs. Illness can push a household into poverty and then keep it there.
- Age. The very young depend on others, and the elderly may live on small or no pensions once they stop earning. Both groups are over-represented among the poor.
- Environmental factors. Drought, floods, poor soil or natural disasters can destroy crops, livelihoods and homes, and the resulting fall in output and incomes pushes households into poverty.
Behind several of these sits a self-reinforcing poverty trap centred on low wages. On the growth side, low wages mean low saving and low investment, which holds back economic growth; on the development side, low wages leave no money to spend on education or healthcare, so human capital and productivity stay low. Both loops feed back into low wages, keeping incomes down. A high dependency ratio (many children or elderly per worker) makes the trap harder to break.
Common exam question
Linking poverty with ill health
Question: Choose the most likely cause of rising poverty in developing economies, or the change that would not show poverty falling (1 mark, multiple choice).
Set in 2 of the 13 multiple-choice papers. Poor nutrition and ill health cause poverty: sick people work less or not at all, and face medical bills. The wrong options would raise incomes: more education provision, more tourism or stronger trade unions. Falling poverty shows up as more people in work, longer lives and higher adult literacy, so a rise in infant mortality does not show progress.
Asked in 1 of the 11 structured papers, as an Analyse of a table of poverty and life expectancy (4–5 marks). Call the relationship inverse (more poverty, shorter lives), support it with the countries at each end of the table, explain it (the poor get less healthcare, food, housing, sanitation and education), then pick out a country that breaks the pattern and give a reason, such as war.
Exam tip
Chain each step from the change to poverty
In the specimen mark scheme, the 6-mark Analyse on how a fall in investment could increase poverty gives one mark for showing what investment is, one for poverty, and the rest for the links between them, so write every step. Less spending on capital goods cuts output, unemployment rises, incomes fall and people cannot afford necessities: absolute poverty rises. Less investment in education, training or healthcare lowers some workers' skills and pay, widening the gap between rich and poor: relative poverty rises. A full chain can earn all six marks without separate definitions.