Equitable Distribution of Income

Absolute Vs. Relative Poverty

Absolute Poverty

• When a household does not have sufficient income to sustain even a basic acceptable standard of living / meet basic needs

• A common monetary measure of absolute poverty is receiving less than $1 a day (In 2008, the World Bank revised this figure to $1.25 a day, and then again to $1.90 a day in 2015.)

How is poverty measured

• The Human Poverty Index (HPI), assesses three elements of deprivation in a country - longevity, knowledge and a decent standard of living. There are two indices, the HPI – 1, which measures poverty in developing countries, and the HPI-2, which measures poverty in developed economies.

•Multidimensional Poverty Index (MPI)

published by the UN in 2010. It measures poverty as an acute deprivation of essential aspects of life. It measures three key targets – living standards, education and healthcare.

Relative Poverty

• A level of household income that is considerably lower than the median level of income within a country (inability to reach a minimum accepted standard of living in a particular society)

The Lorenz Curve

Why is equitable distribution of income important?

• Graphical representation of income inequality by measuring cumulative percentages of total income along the vertical axis, for various cumulative percentages of a population (lowest to highest income) measured along the horizontal axis

• Developed by American Economist Max Lorenz in 1905

• The graphical representation is accompanied by a diagonal 45° line, income equality line

• The Lorenz curve below the income equality line shows the actual distribution of income

• The area between the straight line and the curved line, expressed as a ratio of the area under the straight line, is the Gini coefficient, a measurement of inequality.

• The farther away the curve is from the baseline, represented by the straight diagonal line, the higher the level of inequality

Equitable Distribution

of Income

• Limit the overall amount of growth possible in the economy – less spending

• An increase in inequality would push more people into poverty

• more unequal society is that there could be a threat to democracy (money equals power)

• Inequality has been linked to many social problems, including violence, mental health, crime, and obesity, all of which reduce the standard of living for other members of society

Causes of Income Inequality

• Natural ability
• Education, training and opportunity
• Property ownership
• Ability to influence wages and salaries
• Discrimination
• Poor health or physical disability
• Region of residence
• Luck
• Weeks worked
• Age

Current Statistics

Income Inequality

Solutions to Poverty

• Income inequality is the extent to which income is distributed unevenly in a country.
• It is an important indicator of equity in an economy.
• It tells us how income is distributed within a country.
• Large income gaps can also diminish economic growth if these gaps mean the country is not fully using the skills and capabilities of all its citizens

Solutions Cont'd

• Incentives to hire poor people
• More social programs to help with casual problems for the poor
• Change attitudes towards the poor
• Raise the minimum wage
• Social assistance reform
• Provide incentive to work and retrain
• Apprenticeship programs
• Job sharing
• Four day work week (80% salary)
• Guaranteed annual income
• Reinstate rent control

• Create more jobs for the poor/reduce immigration
• Only allow wealthy immigrants
• Extreme socialist redistribution of social programs
• More government housing - subsidized
• More private charitable contributions to the poor
• Increase welfare payments
• Lower taxes for the poor
• Incentive for rich to donate to the poor - increase for the rich

• Canada gets a “C” grade and ranks 12th of 17.
• Income inequality in Canada has increased over the past 20 years.
• Since 1990, the richest group of Canadians has increased its share of total national income, while the poorest and middle income groups has lost share.

Global Scale

In Canada