Psychology assignment.

! Question 2 from Lectures and Schiller, Chapters 1 & 2

PERSPECTIVES OF POVERTY

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Question 2 To achieve a workable and acceptable definition of poverty, two basic economic approached to the concept of poverty were suggested (i.e. Absolute Approach and Relative Approach). ! Discuss in detail the two approached showing their (a) similarities/differences, (b) strengths, and (c) weaknesses.

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Absolute Approach ■ Costs of basic goods and services necessary for life, calculated their costs, and determines one’s

poverty by their ability to afford that predetermined bundle of goods and services ■ Highly subjective and vague ■ Concept of minimum needs- there are a particular amount of goods and services essential to an

individual or family’s welfare ■ Those who do not possess the economic resources to obtain the goods and services are

considered poor ■ In the most severe conception of this approach this bundle of good and services consists of the

minimum caloric intake to human existence and some form of shelter (minimum needs) ■ Additional frills are tacked onto this basic diet and shelter according to the generosity of the

analyst. A frill is something that is desirable but not a necessity. It is a form of luxury.

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Hypothetical Minimum Needs

■ Example of minimum food, clothing, shelter, fuel, transportation requirements by experts ■ For example:

– How are 2,471 calories translated? There are many ways a person can consume calories.

– 4 lbs of clothing does not take into consideration the type of clothing or weather

Category Amount Minimum food requirement 2,471 calories per day Minimum fuel requirement 37 kilowatt hours

Minimum shelter requirements 60 board feet

Minimum clothing requirement 4 pounds

Minimum transportation requirements

7 miles

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Monetary Measures ■ In a market economy the ability of an individual to obtain needed goods and services

is determined by his or her purchasing power. (i.e. income) ■ Although we need the food, shelter, and other items on our shopping list daily, it is

not necessary to have the right amount of cash everyday ■ The best indicator of a person’s purchasing power over a period of time is income. ■ Where credit is available, goods and services can be borrowed

– No current income is necessary, just a promise to make repayment when time and circumstances permit

■ Assets of goods and services can be acquired without income ■ Government can provide when here is insufficient income or assets such as food

stamps

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Weaknesses of Absolute Approach ■ No agreement of frills ■ Minimum needs varies from state to state and public opinion to government opinion ■ Who should determine the basic needs of individuals? ■ On what basis is the determination of absolute poverty be made? ■ The conception of family needed will change based on their own economic position ■ It is vague and subjective ■ List of absolute necessitates should change over time and have universal

applicability but it does not

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Relative Approach ■ Inequality and poverty are interrelated but separated, but nevertheless separate

entities ■ It assumes a person is poor when their income is significantly less than one-half

of the average income of the population ■ The reduction of the income gaps does not necessarily mean elimination of

poverty ■ Less subjective than the Absolute Approach ■ Defines poverty at the lower end of the income distribution.

– Persons at the lower end of the income distribution are considered poor

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Weaknesses of Relative Approach ■ Perpetuates poverty in the statistical sense, that some fixed proportion of the

population is always regarded as poor ■ The relative measure alone says nothing about the quality of life for people at the

bottom of the income distribution ■ This approach deals with elimination of reduction of inequality of income, but not

elimination of poverty, since by this definition poverty will always persist. ■ There is some point below which people are unhappy or poor, above which people

are content ■ With whom should we compare our incomes? Different types of family, young people,

old people, similar size of family, age, etc. ■ Average income fluctuates and the definition of poverty should follow suit.

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