CABILTES, JOIELYN B.

SECTION CODE 504

Why is it difficult to escape poverty?

Escaping poverty is not an act of charity but an act of justice, as Nelson Mandela wisely noted. Consider a
scenario where you’ve been diligently searching for employment for months, relying on government benefit
programs to cover rent, utilities, and food, but just barely making ends meet. Finally, a job offer arrives, and you
receive your first paycheck in months, offering hope. However, there’s a catch: your new job pays just enough to
disqualify you from benefit programs, yet not enough to cover the same expenses. To make matters worse, you
now have to budget for transportation to work and childcare while you’re at the office. Paradoxically, you find
yourself in a worse financial situation than when you were unemployed.

This demoralizing situation is known as the welfare trap, one of several poverty traps afflicting countless
individuals worldwide. Poverty traps are intricate economic and environmental circumstances that reinforce
themselves, entrenching poverty for generations. Some are linked to personal circumstances like limited access to
education or healthy food, while others afflict entire nations, such as cycles of corrupt governance or the impact of
climate change. What makes the welfare trap particularly cruel is that it stems from policies designed to combat
poverty.

Historically, religious groups and private charities led efforts to assist those in poverty. Today, these
initiatives have evolved into government-provided welfare programs, offering subsidies for housing, food, energy,
and healthcare. Typically, these programs employ means-testing, meaning only individuals below a certain income
threshold qualify for assistance. While this approach aims to direct aid to those in greatest need, it also means that
individuals lose access as soon as their income exceeds the qualification threshold, regardless of their financial
stability. This creates a vicious cycle that harms both those in poverty and those outside it.

Conventional economic models assume rational decision-making, with individuals weighing the costs and
benefits of their options. However, income is a powerful incentive for employment, and when fewer people enter
the workforce, it can slow down the economy, perpetuating poverty and pushing those on the brink over the edge.
While some propose eliminating government assistance programs altogether to break this feedback loop, most
agree that such a solution is neither realistic nor humane.

So, how can we redesign benefits to avoid penalizing people for working? Some approaches allow
individuals to continue receiving benefits for a certain period after finding a job, while others gradually phase out
benefits as income increases, reducing the risk of a welfare trap. Certain governments offer universal benefits like
education, childcare, or medical care to all citizens, regardless of income.

One groundbreaking idea takes the concept of universal benefits further—an idea known as universal
basic income (UBI). UBI would provide a fixed benefit to all members of society, regardless of wealth or
employment status. This is the only known policy capable of entirely eliminating welfare traps, as any earned
wages would complement the benefit rather than replace it. By establishing a stable income floor that no one can
fall below, UBI might even prevent people from sinking into poverty in the first place.

Numerous economists and thinkers have advocated for UBI since the 18th century. However, as of now, it
largely remains a hypothetical concept. While some limited-scale experiments have been conducted in certain
locations, they don’t provide a comprehensive understanding of how UBI would function on a national or global
scale. Regardless of the strategy pursued by governments, addressing the welfare trap necessitates respecting
individuals’ agency and autonomy. Only by empowering individuals to effect long-term change in their lives and
communities can we hope to break the cycle of poverty.