A government program guarantees $18,000 in income, even for those who do not work at all. If the recipient earns income by working, then the $18,000 benefit is reduced by 50 cents for each
$1 earned. Will this program eliminate the poverty trap?

Question

Quizplus · Accepted Answer

This program may still reduce the incentive to work because for every dollar earned, the benefit is reduced by 50 cents, effectively taxing additional earnings at a 50% rate. This could discourage people from working more or at all, as they lose part of their benefits with every dollar they earn.

A Government Program Guarantees $18,000 in Income, Even for Those