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Economics of Poverty Essay

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Abstract

This paper describes various aspects of Economics of Poverty all over the world. The paper describes impact of different factors on socio- economic condition of individuals. Various theories of Economics prove that higher education brings long time positive returns in terms of socio-economic status of an individual. It also describes the difference between individuals of lower and upper class in the society. Various reasons of poverty in the Third World Countries are also described in the paper. According to Economists we must phase out income-tested benefits rapidly if we wish to reduce poverty. In conclusion, it describes that making progress against existing poverty will require building the human capital of low skill and other economically disadvantaged citizens and nations.

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Table of Contents

Introduction…………………………………………………………………………………………..…….04

Economics of Poverty………………………………………………………………………………………………..04

The Economic Argument…………………………………………………………….……………………10

Reducing Poverty by Improving Human Capital, Reducing Non-marital Births, and Selectively Expanding Income Transfers………………………………………………………………………..……16

Make Poverty History Movement……………………………………………………………..…………20

Differences between lower class and upper class population…………………………………..……22

Economics of Poverty and Third World Countries……………………………………………………………..27

Impact of Poverty and Economic Crisis…………………………………………………………….…..32

Causes behind the Crisis…………………………………………………………………………….……37

Conclusion……………………………………………………………………………………………….…40

References…………………………………………………………………………… …………………….43

List of Figures

Percentage and number of children living in low income families…….………………………..07

Rate of poverty by ages ……………………………………………………………………………….11

Poverty and Health care Expenditure……………………………………………………………….19

Regional Poverty Rates……………………………………………………………………………….28

Economics of Poverty

Introduction

In wealthy countries today, absolute poverty – a subsistence standard of living has lost its salience as an indicator of the social problem of poverty. Rather, in contemporary Europe and the U.S. it makes more sense to focus on relative poverty and develop policies to reduce it. Income transfers have helped reduce absolute and relative poverty. But expanding them is economically and political infeasible and, in any case, unlikely to reduce relative poverty much further. Instead, making progress against relative poverty will require building the human capital of low skill and other economically disadvantaged citizens and fostering families’ ability to support their children by reducing the prevalence of single and unwed parents.

Economics of Poverty

We may stipulate, without controversy, that absolute poverty in the sense of extreme material deprivation, such as living below the World Bank’s $1.25/day poverty line, is vanishingly small in the U.S. and irrelevant to debates about antipoverty policy. But for the United States, how policy relevant is the level of absolute poverty as determined by the official poverty measure?

It is largely irrelevant for two reasons. First, when properly measured, the extent of absolute poverty is far lower than the official level, which between 2003 and 2007 has hovered around 12.5% for the entire population and 17.7% for children under age 18. Using the official lines with a revised inflation index (the CPI-U-RS) and adjusting income for non-cash benefits, capital gains, income and payroll taxes, the Earned Income Tax Credit (EITC), public and private health benefits, and the imputed annual value of housing equity, the Census Bureau places the 2007 overall poverty rate at 7.9% (U.S. Census Bureau, 2009b). If one measures economic well-being using a comprehensive measure of consumption, the poverty rate would be about one percentage point lower (Newsom, 2006).

There is broad consensus that the official income measure is a badly flawed indicator of economic well-being because it omits important sources of income as well as taxes. Because of these flaws the official poverty measure has become less and less relevant for public policy. But one can then ask: if someone estimates the level and change in poverty using the Census Bureau’s adjusted income (which addresses the major flaws in the official income measure) while retaining the official absolute poverty thresholds, how relevant would the findings be?

The findings still provide useful information about how far the nation has come in the 45 years since the declaration of the War on Poverty. They also are informative of short run changes in material deprivation and identify population subgroups that would most benefit from stronger antipoverty programs. Based on the Census Bureau’s broadest income measure, the 2007 level of poverty for children under age 18 was 10.4% (7.7 million persons). For persons age 18-24 it was 13.3% (3.8 million). Among persons in female headed families with children under 18, the level was 23.2% (7.4 million). These figures are below the official ones, but still indicate substantial levels of poverty. The corresponding adjusted figures for 2008 are not available as of this writing but, since the 2008 official rates were higher for all major demographic groups, the more recent figures only strengthen this point. In contrast, the corresponding poverty rate for married couple families with children is 3.7%, which suggests this subgroup has much less need of stronger antipoverty programs.

The adjusted child poverty figures for 2007 offer an interesting comparison to 1969. The official child poverty rate in 1969 was 14.0%, the lowest official rate ever recorded. Because 1969 predated significant food stamp and Medicaid spending, the EITC, and SCHIP, the official income measure was probably a much more accurate indicator of economic well-being than it is today. Nearly 40 years later, the adjusted child poverty rate is only 26% lower than the official 1969 rate. America’s social policy has badly failed its youngest members.

Whatever the precise level of absolute poverty, in contemporary affluent societies, relative poverty is a far better indicator of the socially relevant level of economic need. A relative poverty line roughly represents, in Adam Smith’s words, the cost of “those objects that established rules of affability have rendered essential to the lowest category of individuals.” It is the level of income below which persons cannot participate in the mainstream activities of their society. As such, a relative poverty line will rise in step with a society’s standard of living rather than remaining fixed in real terms.

According to Economists the relative poverty line is generally set at 50 to 60 percent of a country’s median household income. Rainwater and Smeeding (2003) report survey evidence for the U.S. that suggests the socially perceived relative poverty line has been 45 to 50 percent of median income. The specific percentage obviously affects the measured level of relative poverty, but has little effect on the trend.

A sensible approach to establishing a relative measure would set the poverty threshold at a designated percentage of median “equivalent income,” which adjusts incomes for household size (Singh, 2005). Income should be defined broadly along the lines of the Census Bureau’s income definition 15 (U.S. Census Bureau, 2009b). The relative poor would then include all persons in households with equivalent income less than or equal to the relative threshold.

It has fundamentally been agreed that relative poverty is most salient for public policy. This implies that one should assess the success of antipoverty policy with regard to its effect on relative poverty, a substantially higher bar than its effect on absolute poverty. In the long run it is the only measure of poverty that makes sense. No one today would accept the poverty line proposed by Robert Hunter as a credible indicator of economic need in 2009. Assuming gradual increases in real income, no one fifty years from now will find today’s official poverty line credible, either.

On a more technical note, there have been reservations about treating relative poverty as more or less synonymous with and indicative of income inequality. Relative poverty only considers incomes of households below a designated percentage of the median; inequality takes into account incomes across the entire income distribution. This means that public policies which affect income inequality, whether intentionally or incidentally, would not necessarily affect relative poverty. For example, restoring the federal tax code to its 1999 structure (because of, say, concerns about the concentration of economic power and political influence) would reduce income inequality but would essentially have zero effect on relative poverty because virtually all households that would bear more taxes are in the top tenth of the income distribution. Conversely, further reductions in the tax on dividends and capital gains would increase inequality and leave relative poverty unchanged. However, policies that reduce relative poverty (e.g. expanding the EITC) would generally reduce overall inequality, other things equal. From this discussion of poverty measurement it has been conclude that:

Ø    A relative poverty standard makes more sense and is more policy relevant in the long run.

Ø    But when we use as complete an income measure as possible, the level and change in absolute poverty are still relevant for the U.S.

Ø    Limitations of Income Transfers as an Antipoverty Strategy

This can be said on economic and political grounds that it would be unwise to place an expansion of income transfers at the core of future antipoverty strategy. The argument makes one main economic point and two main political points:

1. Given current levels of spending on transfers, raising income-tested benefits inescapably pits minimizing disincentives against minimizing costs. To avoid creating high marginal tax rates and their attendant work and marriage disincentives, benefits must phase out gradually as income rises. Then benefits will go to families well above the relative poverty threshold and the total financial cost of expansion will be large. For example, Great Britain’s recent experience with its child tax credit exemplifies the consequences of this path.

But if we wish to keep costs down and concentrate benefits on the neediest, we must phase out income-tested benefits rapidly. Economists across the political spectrum agree that the resulting high marginal tax rates for poor families risk creating “poverty and unemployment traps” (Aspinall, 2001).

2. Most affluent countries face growing budget deficits because of their aging populations and other factors. Reducing these deficits will probably require higher taxes and deep cuts in broad based health and pension benefits. After taking such difficult steps, there is likely to be little political support for expanding income transfers to low income families.

3. If there is new spending, the political incentive will be to focus benefits on families just below the poverty threshold in order to maximize the number of persons pulled out of poverty and, hence, the political credit This is troubling in terms of equity because families in deep poverty, with incomes at or below 50 percent of the threshold, may get little or no help. It is also troubling on the efficiency side because marginal tax rates will rise to high levels for families near the threshold, thereby creating even worse poverty and unemployment traps.

The Economic Argument

The implicit assumption in point one is that, given the current level of spending on transfers, neither the large costs nor the worse disincentives that would accompany additional transfer spending is acceptable. The conclusion that follows is that wealthy economies are close to or may have already reached the economic limits of transfer spending.

It is critical to recognize that point one applies only to income-tested transfers. The American set of income tested programs often imposes marginal tax rates of 50 percent or more on working age families near the official poverty line (Holt and Romich 2007). In contrast, universal transfers, such as child allowances that pay a fixed amount per child independent of family income, do not phase out as family income increases. Thus, they do not create high marginal tax rates for poor and near-poor families and the resulting adverse work and family structure incentives. Point one, then, is not a compelling argument against expanding income transfers in the U.S. if universal programs are an option.

Naturally, the benefits of eliminating the phase out range and its disincentives with universal programs do not come cost-free. Since all families that meet a simple condition (e.g. children under 18, over age 65) qualify, the financial cost of a universal transfer program is much higher than that of an income-tested program providing the same average benefit. The higher costs are paid via higher taxes on middle and upper income families. Those taxes create adverse incentives, but not for poor and near-poor persons. This implies that universal transfer programs would probably have fewer negative effects on low income persons’ work effort and family structure than income tested programs.

It is important to recognize that the strength of the case for universal program is inversely related to a country’s current level of social welfare spending. To see the logic behind this caveat, consider two countries, one with relatively low spending on social programs, the second with relatively high spending. Other things equal, marginal tax rates will be higher in the second. Suppose both countries then expand universal programs by one percentage point of GDP. To finance the increase both will need to raise tax revenues by roughly one percentage point of GDP, which, in turn, will require an increase in marginal tax rates. In both countries the tax increases will create incentives that lead to economic inefficiency. The economics of taxation tells us that the inefficiency will be greater in the country with the initially higher marginal tax rates.

This analysis implies that in countries where current expenditures on social welfare programs are a relatively small percentage of GDP, new or expanded universal transfers will create relatively small efficiency losses. Canada, Korea, Ireland, and the U.S. are examples. The case for expanding universal income transfers is stronger for those countries than for countries with relatively high expenditures on social welfare programs, such as Denmark, France, and Sweden. To the extent there are economic limits to spending on transfers, the U.S. is further away from them than many other affluent countries.

Longstanding debate about the size and policy implications of transfers’ adverse behavioral responses, which pit supporters of the expansive welfare state against critics, sometimes has a tendency to neglect or take for granted the primary functions of income transfers – cushioning income losses from unemployment, illness, etc. and ensuring a minimum income to persons unable to earn it in the market. These equity effects need to be balanced against whatever efficiency costs are created by transfers.

Experience clearly shows that greater spending on income transfers pays off in terms of less relative poverty. Poverty based on market income is roughly comparable among OECD countries. Countries such as Denmark, France, and Sweden that spend heavily on transfers, including significant universal programs, cut the market poverty rate by 60 to 70 percent. Low spending countries such as Canada, Ireland, and the U.S. cut the rate by just 24 to 40 percent. The result is levels of post-transfer, post-tax relative poverty that differ by a factor of two to three between high and low spending societies. Economists correctly observe that the percentage of families moved over any specific poverty line is a crude measure for judging an income support system’s success and that these estimates ignore recipients’ adjustments in behavior induced by transfers and taxes.

Economists plausibly argue that in countries with expansive welfare states, reining in deficits by cutting broad based health and pension benefits may well erode political support for additional transfers to low income citizens. We should note, however, that in countries with large welfare states, current transfer expenditures have already brought relative poverty down to six or seven percent In those countries there is less urgency to further reduce poverty by spending yet more on either universal or income-tested programs. Consequently, erosion of political support for more transfers may not have major negative consequences for poor members of those countries.

In the U.S., despite its comparatively low spending on transfers and high rate of poverty, large budget deficits are also likely to limit support for expanding income tested programs and for expensive new transfer programs. Here, this political dynamic could have serious consequences for the poor. Policy makers may, however, still agree to expand the Earned Income Tax Credit (EITC) and asset-building programs, both of which enjoy support across the political spectrum.

Another political argument draws attention to the political incentives for focusing benefits on families just below the poverty threshold, which would maximize the number of persons pulled out of poverty at relatively low cost. As noted earlier, such an approach would raise severe concerns in terms of both equity and efficiency. According to Economists, this incentive can be muted if policy makers are held accountable for the rate of deep poverty and the total poverty gap as well as the more widely publicized rate of poverty.

The political logic for structuring spending in this way is clear. Yet to date America’s core income tested programs for working age families generally do not have this structure. Temporary Assistance for Needy Families (TANF), food stamps, public housing, and Supplemental Security Income (SSI) all are classic income-tested programs. Their benefits decline as recipients’ incomes rise, so the largest benefits go to the poorest recipients. In all but six states, TANF benefits fully phase out before family income reaches the official poverty line (Rowe & Murphy, 2006). In Medicaid, the largest income tested program, benefits are independent of eligible families’ incomes, not highest for those near the poverty line. Medicaid benefits abruptly vanish as soon as a family’s income exceeds the eligibility limit.

For a married couple with two children, the maximum EITC benefit goes to families earning between 56 and 83 percent of the official four person poverty line. Above 83% the benefit gradually phases out, declining 21 cents for every additional dollar of earnings. This formula provides families near the poverty line with larger benefits than families in deep poverty. Also consistent with economists concern is that earners in the phase out range face a work disincentive because their net wage is reduced by 21%.

In the 1980s and early 1990s, working age families with zero market income received the largest average transfer benefit. The average declined steadily as market income rose. In 2004, after the major expansion of EITC benefits and continued erosion of AFDC and TANF benefits, the average benefit at zero market income was much lower than a decade earlier and it increased until market income reached about 40% of the poverty line. Beyond the 40% level, the average benefit steadily declined, as before (Scholz, Moffitt, & Cowan, 2008). This change means that, after 40+ years of growth and change since the War on Poverty, the transfer system no longer provides most assistance to working age families in greatest need. In this sense, the overall benefit structure of America’s major income tested programs has gradually moved in a direction consistent with the political logic described by BC. Yet it clearly does not concentrate benefits on families near the poverty line.

The tilting of benefits away from the neediest families is a consequence of the emergence since the mid 1990s of a work-based income support system for working age families, spearheaded by the EITC and a large expansion of subsidized child care. To encourage work and self-sufficiency – goals that are best supported by Economists – a work-based approach, by design, delivers more benefits as earnings increase. But only up to a point because, in America’s income tested work-based approach, the benefits eventually must start to phase out. If the work-based strategy keeps expanding and comes to dominate the income tested transfer system, benefits will tilt further away from the neediest families and the equity effects that worry BC may become important. The efficiency effects may also become problematic though, as the EITC experience shows, the net effect on work may actually be positive (Hotz and Scholz 2008).

If the U.S. does embark on a major expansion of work-based programs, the political motivation primarily will be to align its income support system for working age families more closely with core American values about the importance of work and financial self-sufficiency. Moving in this direction will, indeed, tilt the benefit structure in favor of families close to the poverty line. One can see this result as an inevitable side effect of pursuing the goal of supporting work, not a strategy stemming from political motivation to maximize the number of families pulled out of poverty.

Reducing Poverty by Improving Human Capital, Reducing Non-marital Births, and Selectively Expanding Income Transfers

Large population of Economists are willing to reduce poverty (both absolute and relative) by increasing the earnings of low skill workers and reducing the number of single parent families created by non-marital childbearing and divorce. Preventing poverty in these ways strongly resonates with American values. Efforts to spend more on income tested cash and in-kind transfers to supplement low market incomes command far less political support and, should they succeed, risk the unpleasant tradeoff between cost and disincentives that Economists view as a major limitation of transfers as an antipoverty strategy.

There can be two obstacles to pursue this strategy. One is the meager success of most training programs that seek to increase human capital and earnings of workers with low skills and other disadvantages such as substance abuse, mental illness, or a history of domestic violence. Even for programs that pass a benefit cost test, the increase in earnings they produce is on the order of $1-2,000 per year, too little to make much difference in the lives of trainees and their families. The other obstacle is lack of a viable strategy for reducing the number of single parent families. Both obstacles are severe. It would be another good idea to re-double efforts to develop earnings and family policies that have large positive effects and can be taken to scale.

By arguing that more spending on transfers is not a desirable direction for antipoverty policy, yet not identifying viable earnings and family policy options, Economists seem to be suggesting that there are no promising current options for antipoverty policy. In the absence of specific recommendations to comment on, one can sketch options for policy that appear to have promise for reducing poverty among working age families and recognize the limitations of a transfers-only approach. The options aim to boost low-wage workers’ earnings, reduce non-marital childbearing, and incrementally reform the income support system in ways that complement earnings and family policies. No option that are discussed envisions creation of universal transfer programs for working age families, such as child allowances or an entitlement to compensated family and medical leave. Universal programs, despite their attractive features, are probably political non-starters, especially in the current budget environment.

Consider first poor families with young children. Raising their income deserves high priority because it is very likely that being raised in poverty, especially deep poverty, reduces the chances that children succeed in school, work and family formation (Dahl and Lochner 2009 and sources cited within).

The challenges to increasing the human capital of low wage parents are formidable and models that substantially raise earnings may not emerge soon. We do, however, know how to write checks. Until successful models are in place, increasing cash and in-kind aid to poor children may be a sound alternative investment. One incremental option is to increase the maximum EITC for families with three or more children. An alternative is to provide larger EITC benefits when children are young (say age 0 to 5) in light of evidence that the adverse effects of living in poverty are greater at younger ages. Larger EJTC benefits might also spur parents with young children and low earnings to earn more. For severely disadvantaged parents with minimal earnings capacity or a complete inability to work, an indexed federal floor on TANF benefits would modestly improve their children’s standard of living.

Helping disadvantaged young men earn more has been especially challenging. Rigorous evaluation of Career Academies, a high school reform intended to keep students engaged in school and prepare them for postsecondary education and employment, has found sustained earnings gains for Academy students compared to students in a control group. Young men in Academies also experienced positive impacts on marriage and being custodial parents (Kemple, 2008). Mead’s (2007) recommendation to have the child support and criminal justice systems require men to work and to support this requirement by helping them find work may deserve a rigorously evaluated demonstration.

Most low-wage young men and women without children will eventually become low-wage parents. To encourage them to work more, which would reduce their poverty in the short run, and to build a sustained record of work experience, which would help them earn more over the long run after they become parents, Berlin (2007) recommends a substantial increase in their EITC benefits. He would decisively break with current EITC policy by basing the benefit on a person’s own earnings, not family earnings. This reform would substantially reduce poverty among childless persons, a group that currently receives very little income support (Wagner, 2006). Berlin also argues that his reform would increase employment of low-wage workers currently receiving little or no EITC, and may well have beneficial effects on marriage, crime, meeting child support obligations, and encouraging more “on the books” work. Berlin’s (and any other) work-based transfer approach would complement an expanded Career Academies initiative, Mead’s proposal, and other efforts to improve earnings of low skill workers.

Initiatives that increase young low-skill workers’ rewards from work either by improving their human capital or supplementing their earnings with transfers will raise the opportunity cost of parenthood for young women. Consequently, such initiatives may indirectly help reduce non-marital childbearing.

The EITC is one type of “conditional cash transfer,” the condition being that a family must have earnings to receive benefits. Motivated by successful conditional cash transfer programs in developing countries, two of the “Opportunity NYC” demonstrations are rigorously testing more comprehensive conditional transfers than the EITC. The Family Rewards program offers the whole family a wide set of effort-based or performance-based payments (including rewards for sustained school attendance and performance, parental involvement with their kid’s schooling, precautionary health care, full-time employment, and completing skills preparation at the same time as working). The Work Rewards program gives the similar job and skills-training incentives but not the schooling or physical condition components, and targets grown-ups in families. (MDRC, 2009)

Make Poverty History Movement

Every government would love to start a social movement so that it can get rid of poverty. To reach into the lives of people and incite passion and desire enough for people to change their behavior in some way as a result. But ‘movement’ is an overused term in communications. A real social movement should have an energy and momentum of its own. It should be able to exist independent of any ‘push’ messaging.

For instance, ‘Make Poverty History’ is a true example of a social living movement. Made possible by the input of an advertising agency but lived on in the behaviors and the beliefs of its supporters. The campaign was designed to run for 1 year in 2005 but it came alive again in 2006 and still lives today. Books have been written about it. This is all about how to help create a social movement. A movement that grew to be the biggest ever coalition of charities and NGOs, and that led to a doubling of aid to Africa and the cancellation of debt of the 18 poorest countries in the world, all on a budget of $0. This movement was about recognizing something that has become much more than a communications idea, but part of the common vernacular.

In the lead up to the Millennium, the Jubilee Debt Campaign had started something. 86 charities and NGOs had come together to put pressure on the leaders of the rich countries to Drop the Debt that the world’s poorest countries owed to the richest. The campaign ran for 3 years before disbanding in 2001. There was small progress, but noting close to the resolution the campaigners had hoped for. However, the campaign had proven that some kind of coalition could do more than individual NGOs and charities by themselves to affect lasting change at the highest level.

The statement ‘Make Poverty History’ is clear, challenging and evocative. Most importantly, it has the potential to make people believe they could be part of something momentous. Wearing a white band made people feel that they are truly part of this.

It’s notoriously difficult to engage people as campaigners and for most members of the general public being a charity campaigner has negative connotations.

The white band also allows individuals to offer supporters a very easy entry point to show their support of Make Poverty History. They don’t need to sign up to give a tanner a month to us, nor did they need to tie-dye their clothes and bury themselves under a road, but by wearing a white band they show active support.

Differences between lower class and upper class population

When there are lot of people having different cultures and societies in an area or country, mostly there is socio-economical difference that leads to unfairness to specific groups of individuals. People having lesser amount/ number of assets seem to be lower class population where as those having greater amount / number of assets are considered to be upper class population of a state. In US what upper class individuals have done to lower class population is a ‘genocide’, which can be defined as a crime against humanity. Today, there still seems to be a lot of inequality to lower class people in the society. This paper will also examine the difference of quality of life between lower and upper class people in today’s society in terms of receiving basic necessities like education, health and medical care etc.

Poverty is a lifestyle with adverse over all consequences. (Scott, 2008) Those who are lower class are at much higher risk of infirmity than those who are upper class. People who do not become vaccinated due to poverty against various diseases are at risk for a number of diseases, and those who forego their winter flu shots put themselves at greater risk of that sometimes fatal disease. (Scott, 2008) Those who allow themselves to live with high blood pressure put themselves at risk for a whole range of diseases. Those who do not participate in a symptomatic screening for breast cancer, colon cancer, lung cancer, heart disease and other diseases are at greater risk of death from those diseases.

In America the lower class individuals need a truly representative and accountable organisation that has ground level consultation and helps inspire the aboriginal people of America to take ownership of their destiny, and allows them the capacity to do so. Above all lower class people need to make sure that America does not return to a paternalistic way with dealing with the situation. This has been proved a failure and would be proved a failure again, a failure that America cannot afford. It is true that the lower class population have the ‘source of knowledge of their own needs, their learning process and the ways in which learning takes place and the most effective ways and environments in which learn’ (Sherwood ; McConville, 2006).

The first and probably the biggest point about inequality to lower class people all over the world may be concerned with basic needs of life. First of all, a lot of lower class people have been facing a serious lack of provision of water and sanitation, because most of them live in remote areas. Furthermore, this lack of provision of these services has resulted in many unnecessary deaths of lower class people. In contrast to this, upper class people do have certain provision of these services. Furthermore, in spite of the fact that many people service organizations have complained to American government about this unfair situation, the responses have been made by ignoring them or by ambiguously saying to solve this in the near future. (Newsom, 2006) Concerning other services, it is true for lower class population that services are often not available. The reasons for this may include far distance between them and hospitals, schools, offices and leisure centres. On the other hand, upper class population have very sufficient as well as very effective delivery of same services. The fact that the inadequacy of these services continues despite many studies of the cases and a lot of complaints mean that current society has known these miserable conditions and also how to remedy them for a long time, but it simply has not acted.

Already 80% of the low income population are alcoholics, 47% are unemployed, they are twice as likely to be current smokers, and on every index fare far worse than other upper class population of America. Only 33% of children belonging to lower class families complete their schooling compared to the national average of 77%. Health issues also plague their communities, with 15% of lower class population do having running water and 34% of communities’ water supply falling below the standard set by the government. In 2000, 80% of the children all over the world who were affected by pneumonia belonged to under privileged families. (Sherwood and McConville, 2005)

Four times as many lower class individuals suffer with diabetes. 61% of people are classified as obese compared with 48% of upper class adults. The death rate for births of poor women is double that of wealthy women. For all age groups below 75 years the age specific death rate for persons identified as under-privileged was at least double that for upper class peoples. The largest discrepancy being people between the ages of 35-45 years, they were found to be 5 times those of the total population of the world. 43% of 10 to 17 year olds incarcerated in juvenile detention centres are from lower class families.

Like other fields of life, inequality to lower class people obviously exists in education. This inequality can firstly be seen by comparing the number of poor students and all students in America attending high schools. For example, in a study conducted by the Commission into Aboriginal Deaths in Custody (RCIADC), only 65.7 per cent of 15 year-old, 40.5 per cent of 16 year-old and 18.3 per cent of 17 year-old Aboriginal children attended high schools in 1986. In contrast to this, the number of all students attending high schools was much higher (90.1% of 15, 67% of 16 and 39.6% of 17 year-olds). There seems to be some factors for such these big differences, which may include insensitive teachers, unsuitable curricula, lack of parental involvement and most importantly, racism (Scott, 2008). Racism is most likely to contribute to the increase in the reluctance of children of low income families to attend high schools. Another study carried out by the National Review of Education for Aboriginal and Torres Strait Islander Peoples was even more frustrating. It shows that in 1995, the retention rate of Aboriginal students was same as what it was for all students more than 20 years ago.

In America, lower class people are facing a crisis that is screaming for attention, yet no body seems to hear. Lower class individuals suffer everyday in a countless number of ways. Depression, anger, and grief have decimated harmonious communities and domestic violence, alcoholism, drugs and theft have moved in. Nevertheless, do not think that this is a new problem.

Inadequate supply of basic necessities in low- income individuals from prenatal to early childhood and on into middle age also cause elevated rates of mortality and morbidity along with the lesser rate of immunization for lower class individuals. Unluckily, poor supply of basic necessities is not an isolated thing, but also influences the development of characteristics that subsequently restrict employment and professional alternatives and, consequently, socioeconomic mobility. In addition, low status and income occupations frequently are more hazardous and have substandard work environments. All of this suggests there are strong mutual influences between provision of basic necessities and income.

Lower class people usually choose to live far enough away from where they work or shop so that they have to drive to those sites substantially increase their expenses, chance of death or serious bodily injury in an automobile accident. (Newsom, 2006) Those who choose to work as miners or police officers or loggers run a greater risk of violent or accidental death than do the rest of us. Although being unemployed also substantially shortens ones life expectancy due to lack of money.

Human assets and marginal efficiency theory of Economics predict people making choices in relation to their individual productive characteristics concerning their anticipated future rate of return. People, who think about their future, determined, self-reliant, and creative, prefer to spend in learning, education, and wellbeing and, as a result, get a compensatory rate of return. People, who willingly and happily decide not to spend in their human capital, also get their justified financial reward. The varying rates of return are obtained due to intentional choice and reflect special characteristics. (Scott, 2008)

Neoclassical economics provides the idea of independence, self-reliance, utilitarianism, and competence. Such terms have been the fundamental explanation at the back of the socio-economic debates. Individualism and free choice have been the watch words that propelled all business, administration, policy, and the remedial occupation. Any impingement on these fundamental human rights gets in the way of economic competence and diminishes social interests. The famous theories of essential requirements, in both couple of centuries, have normally been reductionist and entity based. The liability of the quality of services purchased is sited directly on the entity, as is the division of revenue. This thing promotes policymakers to pay no attention to the societal patterns of rates of mortality and morbidity and circumvent any debate of social change. At the same time as neoclassical economics take consideration of the entity, institutional economists distinguish as significant and basic processes that neoclassicism does not take into account. Institutionalists condemn that the standards of the institutional planning are considerable in the determination of revenue. (Mackenbach, 2007) They recognize the role of authority, business and government, and of other communal structures that are vital in distributional judgments.

In the past the fight between the business and the employee, the business and the state, and the state and the employee has played themselves out in the perspective of revenue allocation. It is about such emerging associations that institutionalists ought to emphasize their investigation in addressing the association between fundamental supplies and wages.

Avoiding the consequences of poor well-being on income or the impact of financial status on health is to disregard the unenviable uses of power. The share of health services and the principal theories of illness are reflected in public policy resolutions, which then provide the further entrench to the status quo. The rich variety of life style choices for which individuals may bear moral responsibility and the various consequences of those choices suggest that no analysis of the propriety of imposing that responsibility may apply to every person or every condition. We find that joblessness produces unfavourable psychological symptoms and that utilization of health services, when they are accessible, is increased significantly. There are some people, who can manage the apprehension of unemployment better than others. Individuals with sturdy support systems and greater confidence seemed to experience a lesser redundancy stress (Newsom, 2006). Identifying those who are at high risk for psychological and physical problems and finding ways of preventing them from suffering the unpleasant effect of joblessness are imperative areas for further research. (Wallander ; Varni, 2005) It is obvious that excellent physical and psychological state represents a high quality-of-life and reflects several multifaceted factors too. The contexts of teenage years deal with the effects of affiliations, learning transitions, maturation, and all kinds of risks prevalence. (Suzanne and Kelley, 2006) Hence, inequality to particular class of people in employment exists manifestly in today’s society. And the gap between both the classes is growing more and more everyday.

Economics of Poverty and Third World Countries

First there was the ‘First World’, which was the industrialised, capitalist free market economy. In first world there are the United States of America, Australia and Western Europe. Then there was the ‘Second World’, which were the communist centrally planned economies such as the socialist Russian state and the Warsaw Pact. Then came the ‘Third World’, the countries which were still developing (in relation to the first and second worlds) and so are more deprived and disadvantaged.

There are various possible determining categories in which to view Third World coherency such as the economics, geography, history, politics and psychology of the region. Different theories in the past have offered their views, favouring the coherency of one or a few categorisations over others, and some of these are now anachronistic. The categorisation is deeply political and important economically; as will be shown, it has been seen to be about power for subjugated people and it determines credit rating for financial support. Also, why do we ask this title question? It is really so that we can understand the assumptions and complexities that shape this concept in order approach the question of development in an open minded way.

The expression ‘Third World’ was first used by Frenchman Alfred Sauvy in 1952 to give form to the desire of those countries that lacked access to economic opportunities, to find a ‘third way.’ The first and second ways, being those of the capitalistic First World and the socialist/communist Second World. It was politically motivated since these countries had been subordinated by both sides, they wished to form their own identity, and gain strength in that. Sauvy ended his article with, “The Third World is, being avoided, misused and ignored and it too wants to become something.”

This formal non-aligned and neutralist movement began after The Bandung conference in 1955 organised by Indonesia, India, Burma, Pakistan, and Sri Lanka bringing together 29 countries in solidarity to gain political influence. However this was also underpinned with shared anti-imperialistic feelings, and fights for independence of colonial rule. After the end of the Cold War, the non-aligned motive for solidarity declined and as John Toye argues in his book ‘Dilemmas of Development,’ decolonisation was the real driving force for any unity that existed. He said, “The psychology of Third Worldism is the psychology of decolonization.” Peter Worsley also explains where original grouping lay;

The coherence of such a group was necessarily dependent on the presence of a common enemy. It was a negative unity: politically, against colonialism; in economic terms, solidarity between the ‘proletarian nations’ in opposition to the developed ones (Singh, 2005).

Theorists of the counter-revolutionary school of the 1980’s such as Bauer, have viewed the Third World and therefore the instituting of ‘development’ as having been created psychologically out of guilt for colonisation and out of the fact that all these regions receive foreign aid. They argued then that since in their view, the West was not responsible for their poverty, and that the aid did not actually help, it was all a figment of the imagination and so the Third World could not really exist. Conversely, Toye perceptively believed that this is not true since, just because it is a creation of the mind, it does not mean we can just let it go; you only have to look at all the conflicts that exist, the people’s need to be part of a strapping and larger entity to see “(the Third World) is the product of… our malfunction in our present multifaceted position’ (Newsom, 2006). The Third World can be seen to generally exist, then, in this psychological and so political sense.

Can we conceive of there being a rich North and a poor South? It is true that many poor countries can be found south of the equator, although a general statement. Still, this skates over important differences, there are severe inequalities within ‘poor’ countries, the wealth of people in New Delhi or Buenos Aires literally sit next to poverty.

There are also dissimilarities in disclosure to natural hazards and disasters such as those that are climate related. The regions close to either side of the equator will experience hurricanes, floods and tsunamis with those close to fault lines, earthquakes and volcanoes. In the tropics, diseases such as malaria, river blindness and bilharzias will reap havoc. Those regions with poor soils, pests and certain types of predators will have consequences for agricultural capabilities. Different regions have different capabilities for handling these, and destruction of infrastructure and health are very costly. Therefore these prototypes will have an effect on the financial models of growth and poverty in the Third World.

The original theory of there being a coherency was Modernisation theory of Economics, which stated that after colonisation these countries were to emulate modern society in order to have a better quality of life. The conception of these countries was of a less developed economy; people farmed on subsistence, there were low rates of growth, trade with other countries was poor, and there was poor infrastructure and prevalent poverty. The Third World was sought as homogenous with typical under developed economies.

Escobar voices that due to the different histories and diverse cultures of these regions, this supposed homogeneity was inaccurate and therefore you can not have only one development formula. Toye further argues that nowadays, if there had previously been any economic similarity, a growing diversity among the Third World has made this claim void. The long-standing slow economic growth in Africa and the recent debt crisis of Latin America results in different rates of ‘disintegration.’ These rates also compare with the prompt growth of the East Asian tigers. Consequently there is a growing divergence among lower class and upper class within the Third World. Toye argues that these economic discrepancies may also have political connotations, as for example conflicts between less developed, and least developed countries may arise over financial concessions made by the First World. Bearing in mind that Toye wrote his book in the mid-eighties, he makes a final point that although the Third World desires political unity, it has not yet achieved it.

In summary, politically and psychologically, the Third World group has been brought together through common enemies and ideals, although possibly more because of the former. Although, their current economic situations may pull this political unity apart. Historically and culturally it is well understood that Africa, Asia and Latin America diverge widely, while there is a certain similarity in the period of independence. Economically, the idea of ‘underdevelopment’ being a common feature of the Third World was biased and so inaccurate, with recent varying growths of the different regions further revealing contrasts.

We can see that the incongruent history and geography of the Third World shape its economics and in turn shapes its politics and psychology, although these can be removed from reality to reflect hopes of what it could be. This political drive in turn goes someway to creating the Third World in the minds of people (and so the actions of people), which in the end, is where most of the world’s events could be seen to take place. The question of whether the Third World exists therefore could be answered ‘not really’ in the objective sense, and ‘sometimes’ in the subjective sense (people’s perceptions.)

The Asian economies relied on the stability of the United States of America. Such stability was perceived to guarantee growth and prosperity. Reliance was placed upon a powerful fluctuating market (Aspinall E and Berger, 2001). The size and importance of the US globally, is why having a stable peg could have never been maintained. The US continually alters monetary and fiscal policies to ensure maximum benefit of their respective market not that of the pegged Asian economies (Global Agenda, 2007). If there was a fluctuation in the anchor currency market values are drastically altered. The result of banking crises in developing economies is also costly for industrial countries. The factors behind this implication are that developing countries purchase about 25% of industrial country exports.

Impact of poverty and Economic Crisis

One of the biggest financial crises in the history of human civilization has created huge impact in all sector of the economy. US being one of the prominent financial centers of the world have taken a huge beating. Hundreds and thousands of jobs have been lost and investors have lost millions of pounds in stock market. Experts and commentators have indicated that the worst of the economic crisis is yet to come with the effect of a number of instruments such as credit default swaps have yet to hit the financial markets.

Lack of funds coupled with the unwillingness on the part of the banks to advance much needed credit facility to business have resulted in a number of companies from the real economy to either cut down its workforce or close its business. The impact of this has already been felt in the British economy as the country is in the brink of deep economic recession (Armstrong, 2009, 30). Millions of jobs are at risk with demand slowing down business cutting down on their investment and expansion. Leading experts warn that due to the recession unemployment could rise to almost three million.

The stocks markets have plunged as a result of the credit crisis with the banking stocks taking a battering. About 60 percent of the pension funds have been invested in the stock market (Aspinall E and Berger, 2001). The fall in the stock markets have reduced the value of these pensions significantly affecting a great number of people who are in the brink of their retirement. Similarly companies and funds which had invested in the stocks have lost millions of pounds and their balance sheet appears to be much more vulnerable. Due to the global nature of the crisis a large number of  intuitional and individual investors are also poised to lose huge amounts of money which they had invested in foreign banks (Icelandic banks, for example).

The impact of the credit crisis is being felt in every sector from humanitarian aid to climate change packages. The paucity of funds will be felt all throughout the economy. The pound which had been one of the strongest currencies in the recent times has fallen significantly against the US dollar. Although this might be good news for the exporters, imports will be much more expensive potentially stoking inflation. With the inflation at a 10 year high the depreciation in the value of pound can only spell more problems in the future.

The most significant step taken by the government to shore up the economic crisis has been to injected additional capital in banks and money markets. These measures on one hand have been somewhat effective in calming the financial markets (Aspinall E and Berger, 2001). On the other hand, however, they have increased government debt to unprecedented levels. With the increase in unemployment, contraction of business and slump in the housing market, revenue collection of the government is poised to go down (Posner, 2009). All these conditions may lead investors to dump pound holdings further precipitating the value of the pound and raising the cost of borrowing government debt (Aspinall and Berger, 2001).

Finance is the backbone of any country or organization; however, its role in the growth of the economic has always been debated. Some of economists believe that it has no contribution in the economic growth and others suggest that it is the key determinant in economic growth. Considering that the economy’s growth without development is worthless, today’s economists believe that concept of sustainable development and achieving higher living standards is the most important issue. Some of the economists strongly believe that the financial sector does not have any role in economic growth and on the other hand others say, financial sectors are the “pioneers on development of economics”. Income distribution is one of the indicators of economic growth; therefore, it is necessary to evaluate the impact of financial sectors on the income distribution and allocation of resources.

In the economic development phase of Saudi Arabia, the prospect seems good for prospective business opportunities as well as advancing. The Saudi Arabian market is highly competitive and business transactions are dealt in a basis of quality and cost. According to Saudi-online (2000), the following factors have been upgraded for foreign investments “ Free entrepreneurial spirit, respect for private ownership; availability of capital, stabile exchange rates; protection of intellectual properties; absence of controls on capital movement and profits; availability of an advanced and excellent banking system; liberal tax system.” (Saudia-Online)As Saudi Arabia has started the process of building mega-economic cities in the coming years, there are tremendous opportunities available for business with Saudi Arabia. This new venture will open many doors for Saudi Arabia as they are economically booming in every side with other foreign countries.

Inflation is a continued increase in the average point of prices and a major cause for poverty. Inflation does not signify a short term raise in prices; it means that prices are increasing over a long-standing phase of time. With increase in inflation rate the purchasing power decreases. Now if prices and nominal income rise by the same percentage, it might seem that inflation is not a problem. It does not matter if it takes twice as many dollars now to buy fish and meat than it did before, if we have twice as many dollars in income available to buy the products.

It can be seen that inflation has an impact on households, businesses and countries in various ways as described above mainly there is impact on costs of living, redistribution of wealth in case of unexpected inflation and effect on exchange rate of the country (Posner, 2009). The causes could be, a demand pull inflation i.e. increase in total spending that are not offset by increase in supply of goods and services and so cause the average level of prices to rise or a cost push inflation i.e. increase in production costs which cause firms to raise prices to avoid losses.

Under demand pull situation, consumer demand for goods is high, spending pressure by households and businesses, coupled with production at or near capacity, sets off demand pull inflation. Too much money in the economy and in the hands of businesses and consumers can contribute to demand pull inflation (Posner, 2009). Under cost push inflation there is every attempt to increase costs. Upwards pressure on prices comes through increase in material costs, borrowing costs, labor costs, and machinery costs and so on. Inflation has a spiral effect; rising prices from strong spending can cause people to seek a higher income, which in turn cause businesses to raise their prices to pay higher incomes to households and eventually bring poverty.

Annual rates of inflation for several industrial and developing nations in 1990s were diverse across countries. Rates range from 0% in Japan to 328% in Turkmenistan. In Italy 3.6%, Germany 1.9%, US 2%, UK 2.8% and Poland 21.4% (source World Bank, world development report). Hyper inflation is an extremely high rate of inflation. In most cases hyper inflation eventually makes a country’s currency worthless and leads to the introduction of new money. Argentina, in South America, experienced hyper inflation in the 1980s. In 1984-85 the inflation rate exceeded 600% each year. As a result in June 1985 the government introduced a new currency, the Austral. However in 1989 inflation rate was over 3000% which lead to the introduction of another currency, the PESO.

The most dramatic hyper inflation in modern times occurred in Europe after world war one, the price levels rose to incredible levels. By 1924, prices were more than 100 trillion times that they had been in 1914. In 1924, Europe created a new currency called the rentenmark. The German government promised that the new currency was convertible in to a bond which has a certain value in gold (Brimmer, 2008). The respective government took necessary steps to ensure that the respective currency has a competitive standing in the world market to avoid devaluation, which mainly led to introduction of a new currency in case of hyperinflationary scenarios mentioned above.

Governments can play a very active and important role with respect to lowering the rate of poverty and inflation through various policy measures such as ceiling on increase in prices of commodities and on increase in rent. Further, by leaving appropriate higher taxes to individuals and corporations in higher tax brackets, imposing restrictions on foreign exchange transactions, outbound and inbound investments (Posner, 2009).

For instance, Inflation in Dubai has been consistently rising since last 5 years. As per gulf news, the inflation rate of last year was at approx 15% to 20%. The GDP of the economy also increased. The inflation in Dubai is very evident which can be seen in everyday life here. The cost of living has increased considerably, prices of basic necessities like food and other commodities and housing costs have increased dramatically over a short period of time. Dubai rents are soaring, as a result rents of Sharjah, Ajman and also other emirates have also increased. People from Dubai have moved to Sharjah and Ajman as accommodation is relatively cheaper. The population of Dubai has more than doubled over the last five years. There has been increasing problems of traffic congestion, accidents and a general frustration amongst people at large due to the same.

It is true that the salaries of the people have comparatively increased, however, not in line with the inflation. The country has progressed in a short duration, thanks to the vision of his highness Sheikh Mohammed the Ruler of Dubai. His vision, amongst others, is to make Dubai the best Tourist attraction and make it a rich economy. The revenue through oil has also increased in the last few years.

Government plays a major role in inflation. As we have seen inflation is situation of sustained rise in price levels. Dubai is a kingdom, overnight new laws can be created and old laws scrapped. In my view, especially in Dubai, the Government could keep a check on inflation through making laws which lay an upper limit on increase in prices (e.g. recent ceiling on increase in rent Abu Dhabi 7%), create laws raising the minimum wages to be paid, imposing taxes on the upper class if necessary. There is a major construction boom in Dubai – Garhoud bridge expanding hotels, sky scrapers, projects, palm islands, metro and so on, is currently in full swing. This requires a lot of investment and Dubai has been successful in attracting foreign investment by giving benefits such as residence visa and 99 year freehold ownership.

All this has led into a vicious circle where the flow of money in Dubai has increased resulting increase in absolute prices which has in turn led to higher inflation.  Currently, in UAE, a situation is similar where the common man is frustrated with the regular increase in prices, he is unable to gauge when will this increase end? As happiness is something intangible, it’s difficult to measure however; the current situation in UAE with respect to consistent growth in prices has been one of the major causes for dissatisfaction amongst the common man. However, UAE continues to expand and shall emerge as one of the prosperous economies in near future.

Causes behind the Crisis

Several accounts have been through to explicate the foundation of this great financial tragedy. There are a number of compounded factors that has resulted in the outbreak of this economic crisis of enormous proportions (Scott, 2008). Collapse of the US housing market, highly leveraged financial transactions and a low interest rate encouraging borrowings, among others, have all contributed to the downturn in the global financial market. Let us now look at these various causes in greater detail (David, 2001).

Following the burst of the dot com bubble and the possibility of recession looming the US government started reducing the interest rates to boost up the economy. The interest rate became as low as 1.5 percent in June 2003 which was at its lowest level since 1958. This low interest rate found its takers in the form of home buyers and borrowers with the housing market finally showing some growth after years of declining trend. In fact the rate of a 30 year fixed rate mortgage in the year 2003 was the lowest in forty years and so the dream of owning a house in US was becoming a very easy reality for a lot of Americans. With housing prices increasing borrowers felt that the rise in the prices would cover the principal and the interest payments to be made over time. The possibility of making capital gains by selling it in the future also attracted a lot of buyers due to the low interest rates provided by banks.

The US housing market witnessed great boom during the 1997-2005 period due to excessive (careless, as well) lending by banks and the low interest rate, described above. According to the S&P/Case-Shiller national home-price index, American house prices rose by 124% and British house prices increased by 194% during the period 1997 and 2006. The stories were similar in other countries in Europe and Asia as well. In the US homeownership rates rose for all regions, all age groups and all income groups during this period. The US government deliberately encouraged home ownership, which if carried out well reflects good governance and administration. However, if the same policy is carried out carelessly it can lead to great distress and problems.

The low interest rate coupled with rising housing prices made banks and similar financial institutions to make the most out of it. They started marketing and offering attractive products to lure investors and borrowers. They came out with enticing instruments such as adjustable rate mortgages which at the face of it looked very attractive to potential borrowers (Sluzki, 2001). Banks started lending more and more to borrowers as there was no end to it. The advent of mortgage backed securities or Collateralized Debt Obligations (CDOs) caused the banks to be complacent and careless in lending money to borrowers. The result of which was a dramatic increase in the amount of sub-prime mortgages. Sub-prime mortgages refer to those mortgages which are of inferior quality and which are made available to borrowers who do not possess sound credit history and/or repayment capability.

Mortgage backed securities are complex instruments whereby the risk of the lender is packaged and sold to investors globally. It primarily involves issue of securities by financial institutions whereby the loans or mortgages issued act as collaterals. Thus, there was very little concern for the banks to check the credibility and capability of the borrowers as they had more or less avoided the risk by transferring it to other investors. They were earning profits from high interest rates charged to these investors without taking the necessary risks. The mortgage backed securities, having high interest rates, were taken up by investors enthusiastically as they were labelled investment grade securities by credit rating agencies further emboldening the behaviour of the irresponsible bankers. The subprime loans were as much as 20 percent of the total mortgages in the US in the year 2006 (Arnold, 2007). Another important point about the subprime loans was that most of these loans had adjustable mortgage rates (AMRs) which had low teaser rates before the more expensive market based rates were applied. As long as the market interest rates remained low the loans were attractive for the borrowers.

The amount of debt taken by commercial and investment banks increased tremendously leading up to the economic crisis. A change in the legislation in the US allowed investment banks to take increased levels of debt so that they could invest in the lucrative mortgage backed securities (Lampman, 2008). These firms basically made use of financial leverage by borrowing at lower interest rates and investment in higher interest bearing mortgage based assets. Top five US investment banks, which are now either bankrupt or taken over, had almost US$ 1.4 trillion debt in 2007 which is nearly 30 percent of the size of the US economy (Lampman, 2008). The result of this additional source of fund led Bear Sterns to increase debt in such a manner that its borrowing to equity ratio was 33 times. Other firms were not too behind.

Conclusion

Several years will pass before we have good evidence on the impacts of these demonstrations. If they prove effective they would provide new models for reducing poverty and increasing self-sufficiency and, like the EITC, may well attract broad political support and reduce growing gap between upper and lower class population.

In addition to human capital programs and work-based transfers, labor market interventions aimed at employers could help low wage workers. Tougher enforcement of wage and hours laws would enable low wage workers to receive a larger share of the income they deserve (Osterman, 2009). Labor law reforms and a National Labor Relations Board more supportive of unions could help reverse the decades-long decline in collective bargaining. This decline has been an important source of rising earnings inequality and declining wages in the lower half of the distribution (Acemoglu, 2002). Helping employers obtain accurate criminal background checks may increase young black men’s employment earnings by lessening statistical discrimination against them. More aggressive enforcement of antidiscrimination laws also has a role (Geronimus, 2009).

Better enforcement of child support obligations, issues that can help reduce poverty via three separate mechanisms. As a private transfer, child support directly increases the incomes of custodial parents and their children. Second, since child support payments are not reduced when the custodial parent earns more, they have better work incentives than income-tested transfers. Third, better enforcement, which shifts more of the cost of childbearing from unmarried women to their partners, may help reduce non-marital childbearing (Lampman, 2002).

Last, important incremental changes to unemployment insurance (UI) would help it better meet the needs of less-skilled workers, especially during recessions, and complement efforts to raise earnings. Worthwhile reforms include triggering a benefit extension when a recession begins, lowering the earnings threshold for qualifying for UI, and expanding coverage of seasonal and part-time workers (Levine, 2006).

Inequality to lower class people in providing basic needs of life has precisely been examined in this essay. Firstly, low income people have been enduring very inadequate health and medical services. Even though lot of low income people has expired only because of their worst health conditions, the fact is that the today’s society is not playing its role suitably at all. Education systems add to discrimination towards individuals. There is lot of difference in the number of children who attend high school among the normal and lower class people all over the world. Minorities, aboriginal and low income people are also facing lot of problems in getting jobs. It is the responsibility of every government to remedy these issues, and it is to be understood by every individual that low income citizens are also human being and they must shows humanitarianism for them.

In conclusion of the above discussion on the impact of different factors on the life of a person, it has been found that each additional year of education has positive returns in terms of income and socio-economic status along with it individual s of higher socio-economic status tend to be relatively healthy both physically and psychologically a phenomena referred to as inequality. It was found that lower class families are much more likely to ignore or postpone medical care until it is too late and serious health consequences have resulted. In addition, occupational status further exacerbates the health gap between upper class and lower class. In general, those individuals and families living in poverty are much more likely to experience the social and economic effects of ill-health, including low income.

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