poverty trap

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Poverty Trap

An obstacle or disincentive for a person to work to raise himself/herself out of poverty. For example, an increase in income from a job may reduce the welfare benefits for which one is eligible. Likewise, a lack of affordable educational opportunities may prevent one from acquiring skills necessary to earn more money.

poverty trap

a situation where an unemployed person receiving SOCIAL SECURITY BENEFITS is not encouraged to seek work because his or her aftertax earnings potential in work is less than the benefits currently obtained by not working. Given that social security benefits represent the ‘bottom line’ (that is, the provision of some socially and politically ‘acceptable’ minimum standard of living), the problem is how to reconcile this with the ‘work ethic’. One suggested way is for government to provide employers with employment subsidies that allow them to pay wages higher than the minimum level of social security, even though the MARGINAL REVENUE PRODUCT ofthe work undertaken does not warrant it. It will thus be to people's economic advantage to obtain employment, and in so doing it is hoped they will acquire work experience and skills that will improve their long-run earnings potential.

Alternatively, the overlap between entitlement to social security benefits (based on one set of income scales) and the threshold level of income at which people start to pay tax (based on a different set of income scales) can be removed by the introduction of a NEGATIVE INCOME TAX. A negative income tax system replaces means-tested social security benefits on the one hand, and PROGRESSIVE TAXES on the other, with a single unitary tax system. Under this unitary tax system, people pay taxes when they are in employment and earning more than a stipulated minimum income and receive a tax rebate to bring their income up to the stipulated minimum level when they are either unemployed or earning less than the minimum. See alsoSUPPLY-SIDE ECONOMICS.

References in periodicals archive ?
Health shocks, agriculture shocks due to excess or lack of rain or any other crises push the poor back into poverty trap and they are unable to tackle these risks well in time.
In a model with random growth, escape from the poverty trap might be possible with some small probability.
A sub-thread of the growing poverty trap literature emphasizes the relationship between risk avoidance and poverty (Bardhan et al.
out of the poverty trap that afflicts more than a billion people worldwide.
Others think that all of Northern Ontario is sliding into a poverty trap as a result of federal and provincial policies.
My review was more favorable than most others I have seen written by economists, but it did nonetheless take issue with the main thesis of the book--that African developing countries are caught in a "poverty trap" and that a doubling of ODA to Africa would work to break the poverty trap and lift African counties onto the bottom rung of the "ladder of economic development.
A huge push with key investments in people and infrastructure will provide the tools necessary to break out of the poverty trap and start on the path of sustainable development.
The research carried out for Elizabeth Finn Care (EFC), which is hosting a national conference on poverty today, also shows that as they are least likely to have family to turn to, this group will remain invisible and slip further into the poverty trap.
Being employed is more helpful in escaping the poverty trap in some countries than others: in the UK, Denmark, Belgium, Ireland and Germany, it reduces the risk by two thirds; in the Netherlands and Luxembourg, only "slightly".
If not, the report notes, "millions of people will never escape the poverty trap, as with each new [disaster], precious gains being made in poverty eradication are being swept away.
This policy implies non-means-tested child allowances/tax credits, thus removing the stigma of welfare from child payments and eliminating the poverty trap wherein people lose in benefits what they gain in wages when they get work.
In a desperate attempt to escape the poverty trap in Colombia and avoid marrying a man she doesn't love, Maria has agreed to ingest the pellets and smuggle them into New York, where she hopes to find a new life.

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