Cambridge IGCSE Economics 0455
Syllabus points
- Distinguish absolute from relative poverty.
- Explain the causes of poverty.
- Explain policies to reduce poverty.
Two types of poverty
- Absolute poverty — when people cannot afford the basic necessities to survive: food, clean water, shelter, clothing. It is often defined by an income below an international poverty line.
- Relative poverty — when people are poor *compared with others* in their society, even if their basic needs are met. It is linked to inequality.
Absolute poverty = cannot afford basic necessities. Relative poverty = poor relative to others in society.
Key definitions
| Term | Definition |
|---|---|
| Absolute poverty | Income too low to afford basic necessities of life. |
| Relative poverty | Being poor compared with the average in one's own society. |
Causes of poverty
- Unemployment and low wages.
- Lack of education and skills, limiting earning potential.
- Poor health, reducing the ability to work.
- Illness or old age, and having many dependants.
- In developing countries: low productivity, conflict, poor infrastructure and debt.
Policies to reduce poverty
- Economic growth and job creation — more jobs and higher incomes.
- Education and training — raising skills and earning power.
- Progressive taxes and benefits — redistributing income to the poor.
- A minimum wage — lifting the lowest pay.
- Investment in healthcare and infrastructure — especially in developing countries.
Worked example
A government introduces free primary education and a benefits system for the unemployed. Over time, better-educated workers earn more (reducing poverty in the long run), while benefits support those currently out of work (reducing poverty now). The cost is higher government spending, funded by taxes.
Common exam mistakes
- Confusing absolute (cannot afford necessities) with relative (compared to others) poverty.
- Listing only one cause or one policy.
Exam technique
Define both types clearly, give causes, then match policies (short-term benefits vs long-term education and growth) and evaluate their cost.
Quick revision
- Absolute poverty = below survival needs; relative poverty = below society's average.
- Causes: unemployment, low skills, poor health.
- Policies: growth, education, benefits, minimum wage.