Working More to Earn Less | Why the Poor Stay Poor

You may have heard the term “poverty trap” – the notion that the poor are stuck at the bottom. What if someone told you that our welfare system exacerbates this cycle by punishing the poor for working more? Prof. Sean Mulholland argues that this is happening every day. Well-intentioned welfare programs drastically decrease benefits at certain income thresholds—which in effect can make a breadwinner and his/her family worse off when they start earning more. Sound absurd? That’s because it is.

6 Comments

  1. Damian Gunjak

    This is a trap few are capable of escaping because they have to bridge that gap.

  2. RastaJoe

    Perverse incentives, foolish system.

  3. taschrant

    That was…mind blowing.  Makes me sad.

  4. ThisWeekInStupid

    Today’s GOP House just voted to deepen the poverty trap by raising the threshold for the earned income tax credit and child tax credit–two programs which incentivize work among the poor.

  5. Vinay Cardwell

    So how do we get our political parties to be aware of this and how can we change it?

  6. muppet

    In the simplistic “right-left” dichotomy in much public debate, poverty is either blamed on the poor for not working enough or blamed on evil business for exploiting the poor. As this video shows, much of the blame rests with the government, who set perverse incentives, which encourages counter-productive behaviour. 

    Once again, it’s all about institutions & incentives. 

Leave a Reply