S5 Ch33 Poverty

Chapter 33
Poverty
The nature and causes of Poverty
ABSOLUTE POVERTY-туйлын ядуурал occurs when

people do not have access to basic food, clothing and
shelter.
People experience RELATIVE POVERTY-харьцангуй
ядуурал, when they are poor relative to other people in
the country. People who are relatively poor are unable to
participate fully in the normal activities of the society they
live in.
Just as a country can be trapped in a VICIOUS

CIRCLE OF POVERTY-чөтгөрийн тойрог, so can be
individuals. People who are poor are likely to have worse
than average education and health care. This will reduce
their productivity, employment opportunities and income
and will also affect the prospects of their children.
Causes of poverty
There are various causes of poverty:

 Being low-paid work-earning are inefficient to
meet basic needs.
 Being unemployed
 Poor health
 Growing old
 Many dependents in the family
 Poor education
The multidimensional poverty index (MPI)
Dimensions Indicators
Nutrition 1/6
1 Health
Child mortality 1/6
Years of schooling 1/6

2 Education
Children enrolled 1/6
Electricity 1/18
Improved sanitation 1/18
Safe drinking water 1/18

3 Standard of living
Flooring 1/18
Cooking fuel 1/18
Assets 1/18
Possible government policy measures to reduce poverty
• Improving the quantity and quality of education

• Promoting economic growth
• Introducing or raising a national minimum wage
• Encouraging more MNCs to set up in the country.
• Providing benefits or more generous state benefits.
• Land reform
Measure to raise living standards

Measures to reduce poverty should also raise general living
standards. IMPROVING EDUCATION and training will
enhance the knowledge and earning potential of the people
and their ability to participate in the political system of the
country.
REDUCING UNEMPLOYMENT, as already mentioned, also
raises living standards by increasing the quantity of available
goods and services.
Measure to raise living standards
Other ways of improving living standards include
• improving HEALTH CARE,
• increasing and improving the HOUSING STOCK,
• improving the WORKING CONDITIONS
• REDUCING POLLUTION.
Economists debate about the extent to which government

intervention is needed to achieve these objectives. Some
economists argue that government policies will be needed,
such as legislation, to give workers holiday entitlement and
government provision of housing. Other economists argue
that the private sector is BETTER at providing IMPROVED
LIVING STANDARDS. If this is the case, living standards
might be increased by REDUCING GOVERNMENT
REGULATION and TAXATION.
Measures of Income and Wealth inequality
To assess the distribution of income and wealth in a

country, economist calculate the percentages of income
earned and wealth owned by given proportions of the
population.
Two common proportions used are deciles/tenths/ and

quintiles/fifths/. The degree of inequality can be illustrated
on a LORENZ CURVE. On the vertical axis, the
cumulative percentage of income or wealth is plotted and
on the horizontal axis, the cumulative percentage of
population is indicated. The 450 degree diagonal line
shows an equal distribution of income or wealth. The
actual distribution is plotted on the diagram. The further
the curve is from the 450 line the more unequal the
distribution.
The Lorenz curve
Income and Wealth inequality
Income may be unevenly distributed between households due to

• uneven holdings of wealth
• differences in the composition of households
• differences in ability to earn.
The wages received by workers is influenced by

• their skills
• qualifications
• the number of hours for which they work.
High skilled workers with better qualifications are likely to be in high
demand and hence are likely to receive high wages.
WEALTH is a stock of assets which have a financial value. Wealth is

unevenly distributed because there are
• differences in the assets inherited by people,
• their savings
• entrepreneurial skills
Influence of Government on the Distribution of income and wealth
Governments may decide to influence the distribution of income and

wealth because of concerns that a very uneven distribution may be
SOCIALLY DIVISIVE. It may also want to ensure that everyone has
access to a CERTAIN STANDARD OF LIVING.
Governments can influence the distribution in a number of ways:

• Taxation
• The provision of cash benefits
• The provision of free state education and health care, and
• Using labour and macroeconomic policies.
PROGRESSIVE TAXES make the distribution of income and wealth

more even. The provision of unemployment and other cash benefits can
help maintain a reasonable standard of living.
OTHER GOVERNMENT POLICIES that can affect distribution of

income include minimum wage legislation, regional policy and
measures to reduce unemployment.
Definition
Poverty/Ядуурал/: Condition where people's basic needs for food,

clothing, and shelter are not being met.
Poverty is generally of two types:

1. Absolute poverty/Туйлын ядуурал/ is synonymous with destitution
and occurs when people cannot obtain adequate resources
(measured in terms of calories or nutrition) to support a minimum
level of physical health.
2. Relative poverty/Харьцангуй ядуурал/: when they are poor
relative to other people in the country.
Материаллаг баялаг, мөнгөгүй байх нөхцөл байдал.

Туйлын ядуурал нь хүний үндсэн хэрэгцээ(хоол хүнс, ус, ариун
цэвэр, хувцас хунар, байр сууц, эрүүл мэнд, боловсрол)
хангагдахгүй байхтай холбоотой. Харин харьцангуй ядуурал нь
тухайн хүний амьдарч буй нийгэм, эсхүл байршил дахь эдийн
засгийн тэгш бус байдалтай холбоотой ойлголт юм.
Definition
Wealth/Хөрөнгө/: a stock of assets including money held

in bank accounts, shares in companies, government
bonds, cars and houses.
Income inequality/Орлогын тэгш бус байдал/: Эдийн

засаг дахь нийт орлого нь өрх гэр, хувь хүмүүс, эсхүл
тодорхой бүлгүүдэд тэгш бус хуваарилагдсан байдал.
Lorenz curve/Лоренцийн муруй/: graphical

representation of the distribution of income or of wealth.
It was developed by Max O. Lorenz in 1905 for
representing inequality of the wealth distribution.

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Chapter 33

ABSOLUTE POVERTY-туйлын ядуурал occurs when

Just as a country can be trapped in a VICIOUS

There are various causes of poverty:

Years of schooling 1/6

Improved sanitation 1/18

Safe drinking water 1/18

Cooking fuel 1/18

• Improving the quantity and quality of education

Measure to raise living standards

Economists debate about the extent to which government

To assess the distribution of income and wealth in a

Two common proportions used are deciles/tenths/ and

Income may be unevenly distributed between households due to

The wages received by workers is influenced by

WEALTH is a stock of assets which have a financial value. Wealth is

Governments may decide to influence the distribution of income and

Governments can influence the distribution in a number of ways:

PROGRESSIVE TAXES make the distribution of income and wealth

OTHER GOVERNMENT POLICIES that can affect distribution of

Poverty/Ядуурал/: Condition where people's basic needs for food,

Poverty is generally of two types:

Материаллаг баялаг, мөнгөгүй байх нөхцөл байдал.

Wealth/Хөрөнгө/: a stock of assets including money held

Income inequality/Орлогын тэгш бус байдал/: Эдийн

Lorenz curve/Лоренцийн муруй/: graphical

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