Poverty (Grade 11 NSC Matric Economics): Revision Notes
What Is Poverty?
Understanding poverty
The World Bank provides us with a clear definition of poverty. It describes poverty as when people are not able to achieve a minimum standard of living. This means they cannot access the basic things needed to live a decent life.
When we study poverty, we need to answer three fundamental questions:
- How do we measure someone's standard of living?
- What exactly counts as a minimum standard of living?
- How can we measure how many people experience poverty?
Understanding these questions helps us better analyze and address poverty issues.
Types of poverty
There are two main ways to understand and categorise poverty: absolute poverty and relative poverty. Both are important, but they describe different situations.
Absolute poverty
Absolute poverty, also called destitution, occurs when someone has very low income per person. This type of poverty means that income is spread so unevenly that some people cannot afford basic human needs. These essential needs include:
- Clean and fresh water
- Adequate nutrition and food
- Healthcare services
- Education
- Clothing
- Shelter
Absolute poverty is a global crisis. Currently, approximately 1.7 billion people around the world live in absolute poverty. This represents a significant portion of the global population struggling to meet their most basic needs.
South African Context: The Poverty Line
In 2003, the poverty line in South Africa was set at R1100 per household per month. Anyone earning less than this amount was considered to be living in absolute poverty.
This means a family of four people trying to survive on less than R1100 would struggle to afford food, shelter, and other basic necessities for an entire month.
Relative poverty
Relative poverty is different from absolute poverty. It refers to having less resources or income than what is usual or socially acceptable when compared with other people in the same society or country. This means someone might have their basic needs met, but they are still considered poor when compared to others around them.
For example, a person might have food and shelter, but if they cannot afford things that most people in their community take for granted, they experience relative poverty.
Throughout history, poverty was often accepted as unavoidable because traditional methods of production could not provide enough for everyone to live comfortably. This acceptance has changed in modern times as we recognize poverty as a solvable problem.
How poverty is measured
Economists and governments use several methods to measure poverty. Understanding these measurements helps in creating policies to address poverty effectively.
Poverty line income
The poverty line income represents the minimum amount of money needed to cover basic needs. This figure is usually expressed as an amount per month or per day. It can be calculated per person or per household.
Critical Feature: Inflation Adjustment
An important feature of the poverty line is that it must be adjusted each year based on the current inflation rate. This ensures it remains realistic and relevant to current living costs.
Without annual adjustments, the poverty line would become meaningless as prices increase over time.
When someone's income falls below the poverty line, we sometimes say they are "living below the bread line". The poverty line is a crucial statistic for two main reasons:
- All other poverty measurements are based on this figure
- It influences how much money the government allocates to welfare grants and how effective these grants will be
Headcount index (rate of poverty)
The headcount index, also called the rate of poverty, tells us what share or percentage of the population lives below the poverty line. It measures consumption and other indicators of living standards.
Limitation of the Headcount Index
This measurement has a significant limitation. While it tells us how many people are poor, it does not tell us how far below the poverty line these households are.
A family earning just R50 below the poverty line and a family earning R500 below the line would both be counted equally in this measurement, even though the second family is in a much more desperate situation.
Poverty gap
The poverty gap measures the average distance of the total population from the poverty line. This measurement helps us understand the intensity or severity of poverty. It shows not just how many people are poor, but how poor they actually are.
The poverty gap is particularly useful for policymakers because it indicates how much financial support would be needed to lift all households up to the poverty line.
What causes poverty
Poverty does not have a single cause. It typically results from one or more of the following factors:
- Lack of education and skills training: Without proper education, people struggle to find well-paying jobs
- Lack of employment opportunities: When jobs are scarce, people cannot earn income
- Ill health and poor healthcare: Sickness prevents people from working and medical costs drain resources
- Lack of access to resources: Without access to land, capital, or other resources, people cannot be productive
- Corruption and lack of good governance: When governments are corrupt, resources do not reach those who need them
- Wars and civil unrest: Conflict destroys infrastructure and disrupts economic activity
- Exploitation: When people are taken advantage of, they cannot improve their situations
- Discrimination: Unfair treatment based on race, gender, or other factors limits opportunities
- Lack of access to land: Without land, people cannot grow food or build homes
These causes often interact with and reinforce each other. For example, lack of education leads to fewer job opportunities, which leads to poverty, which prevents children from getting education, continuing the cycle.
Effects of poverty
Poverty creates serious problems for individuals, communities, and entire countries. It can have the following impacts:
- Hunger: People cannot afford adequate food, leading to malnutrition
- Increased crime rate and social unrest: Desperation can drive people to crime, creating instability
- Reduced demand for goods and services: Poor people have less money to spend, which hurts the economy
- High social welfare budget: The state must spend more on helping the poor, straining government finances
- Health problems: Poor living conditions and inadequate healthcare lead to illness
- Lack of development: Communities cannot grow and improve when most people are poor
- Rapid urbanisation: Poor people move from rural areas to cities seeking employment, creating overcrowded urban areas
- A continuing cycle of poverty: Children born into poverty often remain poor as adults, passing poverty to the next generation
The Poverty Trap
The continuing cycle of poverty is one of the most challenging aspects to address. When children grow up in poverty, they typically:
- Have limited access to quality education
- Suffer from poor nutrition affecting their development
- Lack resources to start businesses or pursue opportunities
- Often remain in the same economic situation as adults
Breaking this cycle requires targeted interventions in education, healthcare, and economic opportunity.
Poverty in South Africa
In South Africa, poverty has specific characteristics and affects certain groups more than others. People living in poverty in this country typically share the following characteristics:
- Women, children, disabled people, and the elderly are more likely to experience poverty
- They depend on social grants from the government for survival
- They have access to inadequate transport facilities, making it difficult to reach jobs or services
- They have low education levels, limiting employment opportunities
- They lack access to electricity, piped water, and proper sanitation
- Predominantly black and coloured people are affected due to historical disadvantages
- More rural dwellers than urban dwellers experience poverty
- They live in informal housing in overcrowded conditions
Historical Context
These characteristics reflect South Africa's history of inequality and the ongoing challenges in addressing poverty. The legacy of apartheid created systematic disadvantages that continue to affect certain groups disproportionately today. Addressing poverty in South Africa requires acknowledging and working to overcome these historical injustices.
Remember!
Key Takeaways About Poverty:
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Poverty is defined as the inability to achieve a minimum standard of living, affecting approximately 1.7 billion people worldwide.
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Two types of poverty exist: absolute poverty (cannot meet basic needs) and relative poverty (poor compared to others in society).
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Three key measurements help track poverty: poverty line income (minimum needed), headcount index (percentage below the line), and poverty gap (how far below the line).
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Multiple factors cause poverty, including lack of education, employment opportunities, healthcare, resources, and good governance, as well as corruption, war, and discrimination.
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Poverty has serious effects such as hunger, increased crime, health problems, rapid urbanisation, and a continuing cycle that traps future generations in poverty.