Welfare trap
The welfare trap is a name for the phenomenon by which taxation and welfare systems jointly contribute to keep people on social insurance. (This is often also known as the poverty trap in the UK, sometimes referring a little more generally to the loss of means-tested benefit payments as income rises.)
For example if a person on welfare finds part time job that will pay them a minimum wage of five dollars for eight hours per week. The forty dollars they earn will be deducted from their welfare payments leaving them with no net gain. There is often even a net loss as the government will tax that forty dollars leaving the person worse off. For doing eight hours of work productive to society the person is now worse off than they were before. Since entering the work force often begins with jobs such as these the welfare trap contributes to permanently excluding a section of the population from the work force.
There have been a number of solutions proposed to this problem, some have viewed this as a fatal flaw in the welfare system and thus advocate dramatically cutting welfare payments or eliminating them entirely. This view is unpopular as it would leave the very poor no protection from starvation and death. Other schemes that would solve this problem are guaranteed minimum income and a negative income tax. These are both difficult to implement in that the involve not cutting payments to those who are working, and are thus seen as unneeded subsidies.
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