Poverty
Economic Development
Governments use a mix of policies. Some raise the incomes of the poor directly; others raise their long-run earning power; others transfer income from the better-off. The syllabus names six.
Promoting economic growth
Higher output raises the demand for labour, creating jobs and raising wages, which lifts incomes at the bottom. Growth also raises tax revenue, giving the government more to spend on services for the poor. The catch is that growth helps only if its benefits reach low-income households rather than concentrating at the top.
Improved education
Better schooling and training raise workers' skills and productivity, so they can move into higher-paid, more secure jobs. This attacks the poverty cycle at its root, but the gains are long-term because it takes years for education to feed through into earnings.
Improved healthcare provision
Better healthcare keeps people well enough to work consistently and for more years, and removes the medical costs that can push a household into poverty. A healthier workforce is also more productive, raising wages over time. Like education, healthcare provision builds human capital and works mainly in the long run.
More generous state benefits
Unemployment benefit, pensions and other welfare payments give income to those who cannot earn enough themselves, letting them afford food, housing and other essentials. Benefits act fast and directly, but they are costly to fund and, if set too high relative to wages, can weaken the incentive to take low-paid work.
Exam tip
Benefits ease absolute poverty more than relative
Asked whether higher unemployment benefit would reduce poverty (8 marks), develop both sides. For: it raises the incomes of people with little or none, so they can buy more necessities, easing absolute poverty, and their spending adds to total demand, which can cut unemployment. Against: it may blunt the incentive to find work, it misses the retired and the sick, some never claim it, a small rise may lag behind inflation, it may leave relative poverty unchanged, and the money might do more spent on education. A one-sided answer cannot rise above Level 2 (5 marks).
Progressive taxation
A progressive tax takes a larger percentage of income from high earners than from low earners. It narrows the income gap directly and raises revenue that can fund benefits and public services for the poor. Set too high, though, it may discourage effort, enterprise and investment.
National minimum wage (NMW)
A sets a legal floor on hourly pay, directly raising the earnings of the lowest-paid workers so they can afford more necessities. The risk is that, if set above what some firms can afford, it may lead them to cut jobs or hours, which would harm the very workers it is meant to help.
No single policy is enough on its own. Direct transfers (benefits, the minimum wage) relieve poverty now, while growth, education and healthcare reduce it for the long run, so governments usually combine several.
Common exam question
Explaining policies that reduce poverty
Question: Explain two measures that could reduce poverty or redistribute income, or how a better-educated workforce reduces poverty (4 marks).
Asked in 3 of the 11 structured papers. Each of two measures earns a mark for naming it and one for how it helps the poor: a minimum wage raises low pay; state benefits let people without work buy necessities; a progressive income tax takes more from high incomes to help low earners; education, training or healthcare raises earning power. Name the tax and the benefit separately: in the redistribution version, "tax the rich, give to the poor" earns one mark. When it names education, each link earns a mark: more skills and productivity, higher wages, necessities affordable.
Also set in 2 of the 13 multiple-choice papers: low earners paying no income tax but using state healthcare is redistribution of income, not regressive taxation; a higher progressive tax spent on hospitals makes the distribution more even and raises living standards.