Equality, Equity and Poverty I

Equality = same outcomes for everyone — same income, same opportunities, same resources.

Equity = FAIR outcomes — what fairness requires may differ from equal treatment. A progressive tax system aims for VERTICAL equity (treating unequals differently to achieve fair outcomes) while preserving HORIZONTAL equity (treating similar people similarly).

The 2022+ syllabus separates these clearly. Top-band essays use them precisely.

Absolute poverty. Below subsistence-level — cannot afford basic needs (food, shelter, healthcare). Measured against fixed thresholds:

• World Bank International Poverty Line: $2.15/day (2017 PPP). About 700m people worldwide.
• $3.65/day for lower-middle-income,$6.85 for upper-middle-income — alternative thresholds.

Lorenz curve. Graph showing cumulative % of total income held by cumulative % of population (ordered poorest to richest).

• Perfect equality: the diagonal 45° line (bottom 50% has 50% of income).
• Real-world curves bow BELOW the diagonal — the bottom 50% has less than 50% of income.
• Further from diagonal = more inequality.

Gini coefficient = (Area between 45° line and Lorenz curve) ÷ (Total area below 45° line).

• Gini = 0: perfect equality (line and curve coincide).
• Gini = 1: perfect inequality (one person has all income).
• Real-world: typically 0.25 (Scandinavia) to 0.60+ (South Africa).
• USA ~ 0.40, UK ~ 0.35, France ~ 0.30.

Worked example. Sketching a Lorenz curve from data:

• Bottom 20% of population has 5% of income.
• Bottom 40% has 13% of income.
• Bottom 60% has 27% of income.
• Bottom 80% has 50% of income.
• Top 20% has 50%.

Plot these cumulative points. Compare to the 45° line. The area between gives a sense of Gini.

Limitations:

• Gini doesn't show WHERE inequality occurs (top vs middle vs bottom).
• Two countries can have same Gini with very different income distributions.
• Doesn't capture wealth inequality (typically larger than income).
• Doesn't capture opportunity inequality.

Other inequality measures: