Poverty Trap

Poverty Trap is a clear enough term. It is usually created by government meddling. It might be thought to demonstrate the law of unintended consequences. Beveridge brought it to us through the Welfare State. He knew it was a problem - see the Beveridge Report on the point. The meaning is made plain in the Welfare Trap. It was written about by the Spectator, a magazine allegedly written by Capitalist Swine for their own. It isn't. See How to spring the benefits trap. A current and ugly reality has been created in by the Left in America; see Why is liberal California the poverty capital of America?

Welfare Trap ex Wiki
QUOTE
The welfare trap theory asserts that taxation and welfare systems can jointly contribute to keep people on social insurance because the withdrawal of means tested benefits that comes with entering low-paid work causes there to be no significant increase in total income. An individual sees that the opportunity cost of returning to work is too great for too little a financial return, and this can create a perverse incentive to not work.
UNQUOTE
This is a better definition than the other Wiki explanation in the Poverty Trap but still tendentious.

 

Poverty Trap ex Wiki
QUOTE
A poverty trap is "any self-reinforcing mechanism which causes poverty to persist." If it persists from generation to generation, the trap begins to reinforce itself if steps are not taken to break the cycle. In countries with large welfare states which use means testing, the poorest individuals may face high effective marginal tax rates if they increase their income or wealth. This can seriously weaken their incentive to work their way out of poverty.
UNQUOTE
Robbing them of the incentive to work is bad news especially if they are lazy. Lack of training does not help either.

 

The Psychological Poverty Trap ex Haaretz
QUOTE
The psychological poverty trap
The poor aren't less able, they're distracted, says poverty expert Eldar Shafir. Privileged people subjected to the same conditions would also make bad decisions. In a behavioral economics experiment several years ago, researchers asked shoppers at a New Jersey mall to handle the following decision: Have your faulty car repaired for either $150 or $1,500. While the participants were considering how to decide, they were given simple cognitive tasks like solving puzzles.

The researchers, Prof. Eldar Shafir and Jiaying Zhao, both from Princeton University, and Harvard University Prof. Sendhil Mullainathan, expected that the stress from contemplating the $1,500 expense would hurt performance. They were right. But participants with above-average incomes succeeded in their tasks under both scenarios, while those with average or low incomes did worse as repair costs climbed.

Even the prospect of spending any money at all damaged the ability of low-income earners to think rationally.
UNQUOTE
Being under pressure does make it difficult to think. That is obvious. The idea that the poor are just as competent is less convincing.

 

Why is liberal California the poverty capital of America?
Helping the poor sounds like good idea to the well meaning but it becomes Pathological Altruism, making things worse rather than better. Having some 800,000 civil servants administering government operations is a monstrous expense but those thousands want the money. Sacking them would cause lotsa bad feeling, cost votes etc.

Spending nearly $958 billion from 1992 through 2015 on public welfare programs made a difference - for some not others. Making people work for the dole makes sense. It works in Wisconsin, Michigan, and Virginia. 60% of Californians live in poverty and don’t have jobs.

 

Errors & omissions, broken links, cock ups, over-emphasis, malice [ real or imaginary ] or whatever; if you find any I am open to comment.
 
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Updated on 15/12/2023 14:12