December 2 0 2 5
Poverty and
Inequality
CHAPTER 2
What’s inside December 2 0 2 5
2/ undertsand
poverty 3/Appreciate poverty
1/ Absolute &
measures, incidence and Lorez
relative poverty
issues and Curve
or inequality
variables
4/ reflect on 5/examine poverty
ways how to trap and various
alleviate effects of work
poverty combinations
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ABSOLUTE
AND
RELATIVE POVERTY 1
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Absolute Poverty
Refers to having income
or resources below a
fixed minimum needed
for basic survival (the
“poverty line”).
Absolute Poverty December 2 0 2 5
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Relative Poverty
Relative poverty
compares the income
and spending of the
poor to the richer
groups in society.
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Relative Poverty
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Aspect Absolute Poverty Relative Poverty
A condition where people cannot meet basic A condition where people live below the
Definition needs for survival average standard of living in their society
Basic needs (food, water, shelter) ❌ Not met ✅ Met, but often barely
Fixed international poverty line (e.g., $2.15 Compared to median income or living
Measurement per day) standards of a country
Depends on location? ❌ No – same minimum standard everywhere ✅ Yes – varies by country and society
Common in Least developed and developing countries Both developed and developing countries
Malnutrition, unsafe housing, lack of clean Poor housing, limited access to education,
Living conditions water and healthcare healthcare, and technology
Main cause Extreme lack of resources Income inequality and high cost of living
A family unable to afford daily meals or clean A low-income family in a rich country unable
Real-life example drinking water to afford housing or education
Main issue Survival Social exclusion and inequality
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Extreme poverty
Refers to people who
lack basic necessities
such as food, clean
water, sanitation,
housing, healthcare, and
even access to
information.
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Extreme poverty
Common traits of
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impoverished countries
most of the poorest
individuals work in
agriculture, have limited
education
often experience malnutrition
widened the gap between rich
and poor nations
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Factors contribute to poverty
slow economic growth,
low productivity,
rapid urban population growth,
insufficient government services,
natural disasters
weakened labor unions,
tax policies
gender wage gaps
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MEASURING
POVERTY 2
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Poverty Incidence December 2 0 2 5
Poverty incidence is a measure that shows how
widespread poverty is in a population.
Poverty incidence (PI) is the percentage of people or
families whose income or expenditure falls below the
poverty line.
Poverty Incidence
Figure 1. Poverty Incidence among the Basic Sectors (in Percent): 2018, 2021, and 2023
Figure 2. Magnitude of Poor Individuals among the Basic Sectors (in Millions): 2018, 2021, and 2023
Table 1. Poverty Incidence and Magnitude of Poor among Individuals Residing in
Urban and Rural Areas: 2018, 2021, and 2023
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THE LORENZ
CURVE 3
What is the Lorenz Curve? December 2 0 2 5
The Lorenz Curve is a graph used to show how income (or
wealth) is distributed among the population and to measure
inequality in a country or society. It compares perfect
equality with the actual distribution of income.
It was developed by Max O. Lorenz in 1905.
What is the Lorenz Curve?
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POVERTY TRAP 4
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Poverty Trap
Is a situation where individuals,
households, or communities
remain poor over long periods of
time because the conditions of
poverty reinforce themselves,
making it extremely hard to
escape—even with effort.
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Role of government and NGOs
Some programs focus only on
short-term aid
Others may unintentionally
discourage work if employment
opportunities are lacking
Without jobs, skills training, and
access to education, poverty
returns once aid stops
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Why poverty persists worldwide
Poverty persists because:
Income inequality limits
opportunity
Technology favors skilled
workers, leaving the unskilled
behind
Poor regions lack infrastructure
and investment
Repeated crises (pandemics,
climate shocks, conflicts) reset
progress
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Breaking the Poverty Trap
Long-term solutions include:
Quality education and skills
training
Stable employment opportunities
Access to healthcare and
nutrition
Social protection balanced with
job creation
Investment in rural areas and
agriculture
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POVERTY REDUCTION 5
Why Government Action Matters
Creates policies to improve people’s welfare
📈 Long-term national benefit
⚠️Poor households face higher risks of:
Health issues
Unemployment
Drug dependence
Illiteracy
Homelessness
Being victims or perpetrators of crime
[Link] TRANSFERS (CCT Programs)
What They Are
Programs that give money to poor families in exchange for meeting
conditions like school attendance and health checkups.
Where They Are Used
Latin America
Africa
Philippines (4Ps – Pantawid Pamilyang Pilipino Program)
4Ps: Pantawid Pamilyang Pilipino Program
Goals
Improve health, nutrition, and education of
children aged 0–18
Provide monetary support to the poorest families
Offer social development programs
Help families break the poverty cycle
4Ps: Pantawid Pamilyang Pilipino Program
Goals
Improve health, nutrition, and education of
children aged 0–18
Provide monetary support to the poorest families
Offer social development programs
Help families break the poverty cycle
2. In-Kind transfers December 2 0 2 5
The government reduces poverty not only through cash assistance but
also through direct provision of goods and services. These are delivered
through specialized welfare programs, such as:
Social pensions for senior citizens
Supplementary feeding programs for children and vulnerable groups
Temporary shelter for the homeless and those affected by disasters,
calamities, or conflict
Free medicines and vaccines, including flu shots, from local health
centers
These programs act as social safety nets, ensuring that indigent families
receive essential goods and services even without cash.
3. Work incentives December 2 0 2 5
These programs are commonly implemented when natural disasters
occur.
People who are displaced or lose their jobs because of calamities are
offered paid work opportunities to:
Help rebuild communities
Earn a reasonable wage
Support their families during hardship
This provides both income and dignity, allowing affected individuals to
contribute to community recovery while receiving compensation.
4. Minimum Wage Law December 2 0 2 5
This law is passed by Congress or the Senate to mandate a minimum
wage for workers based on:
Geographic location
Duration and nature of work
Type of industry
The purpose is to ensure that workers receive a fair income that enables
them to meet basic needs.
Supporters argue that this protects low-income workers at no cost to the
government.
5. Adjust Tax Code December 2 0 2 5
The goal of tax reforms is to make taxation fair and equitable. Key
intentions include:
Ensuring that low-income individuals (earning at or below a specific
annual amount) pay 0% income tax
Collecting more taxes from higher earners, based on the principle of
ability to pay
Reducing loopholes used by the wealthy to avoid taxes
Fixing ambiguities in the tax system to ensure just and consistent tax
implementation
6. Sustainable Development Goals December 2 0 2 5
The goal of tax reforms is to make taxation fair and equitable. Key intentions include:
The United Nations identified poverty reduction as a priority global challenge.
The SDGs outline several key actions for developing countries:
a. Improve access to sustainable livelihoods and opportunities
b. Provide universal access to basic social services
c. Develop stronger social protection systems
d. Empower people living in poverty
e. Address poverty’s disproportionate impact on women
f. Strengthen cooperation with donors and recipients
g. Intensify international cooperation
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END OF CHAPTER 2
Prepared by Rosella Abenio, MBA
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THANK YOU!