The Welfare Cliff, a.k.a. the Low-Wage Trap

Pretend you are a poor, single parent of two in Chicago, earning $12 an hour, working full time, and determined to do what is best for your family. And suppose your employer, impressed with your work, offers you training for and promotion to a new job paying $15. Should you take the offer?

It sounds like a no-brainer, but it’s not.

That’s from an article cross-posted last week by Learn Liberty and FEE.

My friend Prof. Jeremy Horpedahl posted this clarifying comment in a Facebook discussion:

“This is real, and important. But crucial edit: both the absolute size of the benefits and the biggest cliff (at $15/hour) are because of housing assistance. Most poor people don’t receive housing assistance: http://www.npr.org/sections/money/2016/04/29/476179674/episode-698-the-long-way-home
And the second big cliff at $18/hour is due to the loss of childcare subsidies. So it primarily applies to families whose children are too young to be in school.
With those caveats, this is clearly a bone-headed way to assist the poor.”

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One Response to The Welfare Cliff, a.k.a. the Low-Wage Trap

  1. Elan says:

    The question that should be asked is not why wages haven’t gone up but rather why haven’t REAL wages gone up? What difference does it make if wags are rising but the scofflaw governments are doing everything possible to drive up prices for food, energy, housing, car maintenance etc? If lets say governments got out of the way in order for prices to come down, you wouldn’t need to increase the minimum wage at all.

    Irrespective of this, why in the world are 30-40 years working at McDonald’s as cashiers? That is a job for a 15 year old. But I suppose with the minimum wage, workers comp regulations, and who knows what else, kids will never be able to be employed save it for a family business.

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