good reading
A welfare trap is a situation in which the income (wages plus government benefits) of an individual on welfare remains the same or actually decreases if that individual starts to earn higher wages but loses some or all of his government benefits. For example, if a particular government program provides $5k in benefits for individuals earning $30k or less, an individual who earns $29k in wages has a higher income ($34k) than another individual who earns, say, $32k in wages. Obviously, this creates a perverse incentive for individuals on welfare to avoid work or higher-paying work (which, to first order, is more productive and generates more wealth) since they have the same or even higher income by not working and/or being less productive. This perverse incentive exists even for otherwise well-motivated individuals on welfare (i.e. people who are not simply lazy “moochers”). Moreover, for all the talk that the “rich”…
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