When people in countries are not able to afford some goods and services due to an income that is below a certain level required in order to maintain minimum living standards; such poverty is referred to as absolute poverty. However, relative poverty can be referred to as poverty, wherein the income is less than the specified proportion of average income. The set standard for absolute poverty remains same in all countries and does not change over a period of time. In U.K. Settings, absolute poverty is very rare. When people are not able to manage their basic needs, like food, clothes, shelter then they are considered to be falling under absolute poverty category (Johanides 2010). Under absolute poverty, people are homeless and earning of people is regarded to be less than ?1 a day, which is very rare in U.K. There are various causes of absolute and relative poverty in U.K. The main causes of absolute poverty can be low overall output levels or GDP, an unequal distribution of income, lack of employment opportunities, lack of education, etc.
On the other hand, there can be various causes, including salaries and incomes growth inequality, high level of unemployment, regressive taxes of relative poverty in U.K. There is an unfair in the salaries and incomes growth in the U.K. people is found. There are various reasons, such as deindustrialisation, low increase in employees’ wages, mainly in public sector, decline of trade unions, increased demand for highly skilled workers by organisations, etc., due to which, the wage differentials have increased in U.K. settings. It is believed that the decline of trade unions can lead to problems for workers because in the case of declining trade unions, they are not able enough to bargain for higher wages and get their grievances addressed by the management. In order to deal with the market competition effectively, the companies are demanding more for highly skilled workers and the increase in such demand results into increasing wage differentials. Some benefits value of the country, such as state pension and the others are falls in the UK which is one of the main causes of poverty. Moreover to this, high level of long term unemployment among the UK people results of poverty in varying degrees in the UK. Settings and tax changes are responsible for the poor In the UK. Thus, high level of taxation is also responsible for causing relative poverty in the U.K.
Welfare Benefit Systems
Poverty is a curse to an economy. It has become a subject of global interest. The governments define the poverty by finding out average income. They run several welfare benefit schemes to reduce the poverty. The schemes are set of programs are aimed at transferring 10-30% of the nation’s Gross Domestic Profit to the society, so that those who their income is below the income average can be ensured. The redistribution of income to reduce the poverty is gaining importance globally. There are several ways for income redistribution to reduce poverty. One of this ways is Welfare Benefit Systems. Welfare benefit programs are government funded programs to give aid to the people who need social and economic support. Simplification of welfare benefit systems will surely reduce poverty and help people in making things better. The welfare benefit systems must be simple, so that the schemes can link to public information campaign. In this essay I will discuss the system of welfare benefit, debt system, advantages, disadvantages of welfare benefit Alternative and the key answer to decrease poverty.
Welfare benefit systems provide debt relief to the families and individuals who live as functional members of the society, and are unable to do the work.
Universal credit system is an effective step to redistribute the income for reduction in poverty welfare benefit systems. Under Universal credit system, the benefits include income related employment and support allowance, income based job seeker allowance, income support, housing benefit, council tax benefit, working tax credit and child tax credit. The poverty will be reduced, as it will provide more opportunities for the job seekers. The Universal Credit has provisions to reward all kind of work eliminating the need of specific number of hours for qualifying tax credit (The Stationery Office 2010).
Advantages of Welfare benefit systems
Welfare benefit systems reduce inequality in income through redistribution. This reduction in inequality expands and Stabilities the consumer demand. It increases the chances of poor individuals to invest in education, increases workers motivation and cooperation at the workplace. The social security programs increase the flexibility of the firms in labor deployment; thus increasing the opportunities for poor to find jobs.
Disadvantages of Welfare benefit programs
The redistribution of income reduces poverty but only for the short run. Most of the benefits of the welfare systems are enjoyed by high level and medium level income holders, and the poor receive little benefits. For example, in the US, the transfers, credit payments, and benefits of taxes are going to the high and middle income class rather than poor. In most of the industrialised nations, the welfare benefits systems are universal in appeal; thus, less targeted towards the benefit of poor.
In addition to this, the welfare benefit programs are detrimental for the well being of poor. They make the individuals depend on the benefits provided by the government, making them inactive, thereby increasing the power rate. Poor individuals are trapped in the poverty because the welfare benefits suck them and they find it better to depend on the government’s financials are transfer rather than taking low income jobs. The transfer payments and redistribution of income keep the poor people alive, but it cannot help them to raise their standard of living to bring them well above the poverty line. In spite of depending heavily on the welfare benefit programs, if they had chosen to work at an entry level job, there would have been chances of stepping up the job ladder, consequently stepping above the poverty line. An excessively generous welfare benefit program produces more poor.
Welfare benefit systems subvert the growth of the economy; thus, fail to reduce poverty in long run. Kenworth tell us that the efficient in trade unions, high taxation and governments’ incentives decrease the probability of investing and working. Hence, the welfare benefit programs are ineffective to reduce poverty in the long term, irrespective of the genuine intentions of the government (Kenworthy 1998).
Alternative solutions to reduce poverty
Strong economy is the key to success for every nation. Sustained economic growth is the best solution to eliminate poverty, as it generates wealth. Unemployment is also one of the major causes for poverty in an economy. For instance, 65% of poor individuals in the UK are unemployed and unemployment is the root cause for poverty in the UK. The employment opportunities must be created from both the supply and demand side. Working on root causes will surely reduce poverty rather than simply relying on providing benefits (Mankiw 2008).
In conclusion, we can say that there are several steps to decrease poverty through redistribute income. I think that the government should use welfare benefits like increasing opportunities to find a job which is one of them.
Bibliography:
Johanides, M. (2010) “What is absolute poverty?” [online]
http://www.helium.com/items/1917278-how-real-is-absolute-poverty-and-does-it-really-exist
Accessed 14th March 2011
Kenworthy, L. (1991) “Do Social Welfare Policies Reduce PovertyA Cross National Assessment” [online]
http://www.u.arizona.edu/~lkenwor/sf1999(poverty).pdf
Accessed 14th March 2011
Mankiw, N.G. (2008). “Principle of Microeconomics” [online]
http://books.google.co.uk/books?id=fIj2bLjFnoC&lpg=PA5&ots=mScm1zc63x&dq=Benefit%20Systems%20and%20Work%20Incentives%20mankiw&hl=ar&pg=PA5#v=onepage&q&f=false
Accessed 16th March 2011
The Stationery Office. (2010) “Universal Credit: Welfare that Works” [online]
http://www.official-documents.gov.uk/document/cm79/7957/7957.pdf
Accessed 15th March 2011
