poverty trap
Noun: A situation in which an increase in a person's or family's earned income results in a loss of government benefits (such as housing assistance, food stamps, or tax credits) that is equal to or greater than the income gained. Consequently, the individual or household experiences little or no net financial improvement and may even be worse off, creating a disincentive to earn more and effectively trapping them in a state of poverty.
The term is used to describe a specific economic and social policy dilemma. It is often discussed in contexts of welfare systems, social security, and economic policy analysis.
Examples: * The single mother declined the promotion because it would have pushed her into the poverty trap, causing her to lose crucial childcare subsidies. * Critics of the current system argue that the steep withdrawal of benefits creates a powerful poverty trap for low-income families. * He felt stuck in a poverty trap, where every extra hour he worked seemed to make his financial situation more precarious due to lost benefits.
- "To be caught in a poverty trap": This is the most common collocation, emphasizing the state of being ensnared by the situation.
- Many part-time workers are caught in a poverty trap and cannot afford to work more hours.
- "To fall into a poverty trap": Describes the process of entering this situation.
- Without careful financial planning, a small pay rise can cause someone to fall into a poverty trap.
- Welfare trap: A near-synonym often used interchangeably with "poverty trap," specifically highlighting the role of welfare benefits.
- Benefit cliff: A related concept describing the sudden and complete loss of benefits when income exceeds a specific threshold, which is a key mechanism that creates a poverty trap.
- Disincentive to work: A phrase describing the behavioral effect caused by the poverty trap.
- Welfare trap
- Cycle of poverty (a broader, related concept)
- Dependency trap
- Means-testing: The practice of assessing an individual's financial means to determine eligibility for benefits, which is the administrative process underlying the poverty trap.
- Marginal effective tax rate (METR): In this context, the effective "tax" rate (through benefit withdrawal) on additional earnings, which can be extremely high in a poverty trap scenario.
- In-work poverty: The state of being employed but still having an income below the poverty line, a condition the poverty trap can perpetuate.
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a situation in which an increase in income results in a loss of benefits so that you are no better off
