As a result of disaggregated welfare programs, each with their own eligibility criteria and incentives, one in four low-wage workers face marginal tax rates above 70%, creating ‘poverty traps’ that disincentivize earning further income, lest they lose more in benefits than they gain in wages.
In practice, this means one in four workers face a situation where earning additional income disqualifies them from welfare programs of which they are recipients, ultimately losing them more money in total.
empirical