Key Concepts and Summary
A poverty trap occurs when government-support payments for the poor decline as the poor earn more income. As a result, the poor do not end up with much more income when they work, because the loss of government support largely or completely offsets any income that is earned by working. The bite of the poverty trap can be reduced by phasing out government benefits more slowly, as well as by imposing requirements for work as a condition of receiving benefits and a time limit on benefits.
antipoverty programs set up so that government benefits decline substantially as people earn more income—as a result, working provides little financial gain