Question

Describe how antipoverty programs can discourage the poor from working. How might you reduce this disincentive? What are the disadvantages of your proposed policy?

Answer 1

Anti-poverty programs that provide free commodities/facilities to the poor discourage them from working. This is because if the poor make full and efficient use of these commodities/facilities, there is a high possibility for the poor to improve their living standards and also increase their income levels. This increase in income levels will push these poor just above the poverty line, and thus they will not get the same benefits from the government that they once did.

This disincentive could be reduced if the government sets some regulations to monitor the progress of people who have received the benefits for the significant amount of time. For example, the government can do away with the reservation system of the poor in the education sector if one generation of the family has already received the benefit of education initially.

One disincentive of this policy could be that this could cause anger among the interest group who were receiving the benefits of reservation. It is a common human psychology that once the government has increased its expenditures and started providing free benefits to the public, it gets very difficult for the government to reduce its expenditure levels to its initial level.