Living Standards, Poverty and Population: Question 4

Worked solution

Part (a): Absolute poverty vs relative poverty

Absolute poverty describes a situation where a person or household cannot afford the basic necessities required to survive, adequate food, clean water, shelter and clothing. It is judged against a fixed, minimum standard of living, independent of how much anyone else in society earns.

Relative poverty describes a situation where a person or household has an income significantly lower than others in the same society (commonly compared with the average or median income), even if their basic needs are still being met. It is judged by comparison with others, and can persist (or even worsen) as a country’s average income grows, if the poorest households’ incomes do not keep pace.

The key distinction: absolute poverty is about survival, while relative poverty is about relative position within a society.

Part (b): Two causes of poverty in Selbridge

• Unemployment: the workers made redundant when the textile factory closed have lost their wage income entirely. Those who remain unemployed rely on state benefits, which are usually set below the wage they previously earned, pushing their household income down and increasing the risk of poverty.
• Low wages: the redundant workers who did find new jobs in cleaning and retail are, according to the scenario, earning wages below what is generally considered enough to live on comfortably in Brenmark. Being employed does not automatically prevent poverty if the wage on offer is too low to cover an adequate standard of living. This is sometimes called being “in-work poor.”

Part (c): Evaluating a National Minimum Wage for Brenmark

Case for the NMW reducing poverty:

• It would set a legal floor under wages, directly raising the pay of the low-paid cleaning and retail workers in Selbridge, giving them more income to cover living costs.
• Higher legal wages for the lowest-paid could lift some in-work households above the poverty line, tackling the “low wages” cause identified in part (b).

Case against / limitations:

• The NMW does not help the workers who remain unemployed. It only raises pay for people who already have jobs, so it does not address the unemployment cause of poverty directly.
• If the minimum wage is set higher than some employers in Selbridge can afford to pay, firms may respond by cutting jobs, reducing workers’ hours, or raising prices to cover the higher wage bill. Any of which could increase unemployment or reduce living standards elsewhere in the local economy, partly offsetting the intended benefit.

Overall judgement: a National Minimum Wage is likely to help reduce poverty among Selbridge’s low-paid employed workers, but on its own it is only a partial solution, it leaves the unemployed workers without direct support and carries some risk of reducing employment if set too high. Brenmark’s government may need to combine it with other policies (such as benefits, retraining, or support to help unemployed workers find new jobs) for a more complete solution.

Final answers

• (a) Absolute poverty = unable to afford basic necessities to survive; relative poverty = income far below others in the same society, even if basic needs are met.
• (b) Unemployment (redundant workers with no wage, relying on lower benefits) and low wages (new jobs paying below a comfortable living standard).
• (c) The NMW would likely help low-paid employed workers but does not help the unemployed, and risks job losses if set too high, a partial, not complete, solution to poverty in Brenmark.