Nova workboard

a blog from young economists at Nova SBE

Poverty in developed countries

 

When we think of poverty, it is usually the kind of poverty we see in third world countries that come to mind. Starvation, famine and homeless children and families are “common” images we are faced with on a regular basis in every media channel. However, poverty also exists in developed countries, even in the richest countries in the world. In wealthy countries, though, poverty rarely takes the form of famine or starvation. Homelessness is more common, and is widespread in many countries, but this is a multifaceted phenomenon that can have many different causes other than poverty. People who are poor in wealthy countries may still have full-time jobs and earn a decent income every month. It is mostly their life situations that determine whether they are poor or not.

 

Poverty in developed countries can be relative or absolute. Relative poverty refers to a standard defined by the society in which an individual lives. It differs between countries and over time, an example being that you are poor if you are living on less than for example 60% of a country’s average equivalized income. Absolute poverty refers to state of being where a person does not have enough resources to afford a basic consumption basket (of food, housing, clothing etc.).

 

There are many different reasons why there are poor people in industrialized countries. For example, there may be stagnating wages, long-term unemployment and rising prices of essential goods. Other reasons that are more complex may be racism, immigration and an increasing number of single parent households. If the social safety nets are absent or low, poverty may become even more widespread. Proper day care facilities, care for the elderly and health care are important factors to prevent poverty increases. These last factors are evident when we look at growth in poverty in the developed world. In Scandinavia, where the countries are known for their extensive welfare benefits and high safety nets, the trend is notably different from other industrialized countries. While almost all other countries have increased amount and depth of poverty, the Scandinavian countries have shown a stagnating or decreasing development[1].

 

In a way, we can say that poverty reflects failures in the systems for redistributing resources and opportunities in a fair and equitable manner.  These lead to deep-seated inequalities and thus to the contrast of excessive wealth concentrated in the hands of a few while others are forced to live restricted and marginalised lives, even though they are living in a rich economic area[2].

 

We see that poverty is a complex issue, and there is no clear answer as to how to prevent it or eradicate it. But better social safety nets, clear redistribution of resources and opportunities, better arrangements for unemployment, and more focus on racism, immigration and divorce may help to improve the poverty rates in many industrialized countries. With a clear focus, maybe it is actually possible to overcome these challenges!

 

Lene Didriksen

 

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Author: studentnovasbe

Master student in Nova Sbe

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