Imagine a scenario where you have been without a job for several months and have been actively searching for employment. You are currently receiving minimal assistance from government benefit programs to cover your expenses for rent, utilities, and food. At last, you will receive a response regarding your job application. After a prolonged period without income, you finally receive your first paycheck, indicating a positive change in your circumstances. However, there is a condition or limitation that applies. Your new job’s salary is sufficient to render you ineligible for benefit programs, but insufficient to cover the same expenses. In addition to your work duties, you must pay for commuting and childcare. Curiously, your current financial situation is worse than when you were jobless. Economists refer to this demoralizing situation as the welfare trap, one of several poverty traps that impact millions of individuals globally.
The Interconnection between Economic and Environmental Conditions
Poverty traps are the interconnected economic and environmental conditions that sustain and perpetuate poverty across multiple generations. The following factors contribute to global poverty: Corrupt governments have the ability to transform a highly affluent nation into an impoverished one. Additionally, a history of exploitative colonization, inadequate governance, armed conflict, societal instability, harsh climate conditions, or antagonistic and belligerent neighboring countries can also contribute to this situation. Debt burden exacerbates a country’s weaknesses by impeding its ability to allocate adequate resources to education, leading to a workforce with insufficient education.
The Role of the Religious Organizations
In the period preceding the 20th century, religious organizations and private charitable organizations often took the lead in such endeavors. Currently, these programs are commonly known as welfare programs, encompassing government-funded assistance for housing, food, energy, and healthcare. Usually, means-testing applies to these programs, qualifying only individuals whose income falls below a specific threshold to receive benefits. The objective of this policy is to allocate assistance to individuals with the greatest need. However, it also implies that individuals lose access once they surpass the qualification threshold, irrespective of their financial stability to maintain that status. This detrimental cycle disproportionately impacts individuals from both impoverished and affluent backgrounds. Conventional economic models operate under the assumption that individuals are rational agents who carefully consider the costs and benefits of their choices and select the most advantageous course of action.
Individuals Residing In Nations
The world possesses an ample amount of wealth and resources to ensure that every individual in the human race can experience a satisfactory standard of living. However, individuals residing in nations such as Burundi, South Sudan, and the Central African Republic persistently endure extreme poverty. Other potential candidates for the unenviable distinction of being the world’s poorest country, such as Afghanistan, Syria, and Eritrea, face significant challenges in assessing their economic status due to prolonged political instability and conflicts, which have resulted in a dearth of reliable economic data.
Deceleration in the Economy
When people in poverty understand that working won’t bring them any overall benefits, it motivates them to keep depending on government assistance. Undoubtedly, individuals engage in work for various motives, encompassing societal expectations and individual principles. However, the primary motivation to seek employment is the income it provides. When there is a decrease in the number of individuals acquiring new employment, it leads to a deceleration in the economy, resulting in the perpetuation of poverty and the possibility of pushing individuals who are on the brink of poverty into destitution. There have been suggestions that completely eliminating government assistance programs could disrupt this cycle of cause and effect. However, the general consensus is that the proposed solution is both impractical and lacking in compassion. How can we revamp benefits to avoid imposing penalties on individuals for their employment?
Global Poverty Statistics
Based on the most recent poverty statistics, around 9.2% of the world’s population, equivalent to approximately 700 million individuals, reside in conditions of extreme poverty. Extreme poverty is defined as living on an income of less than $1.90 per day. Developing countries primarily house the majority of individuals living in extreme poverty, with sub-Saharan Africa and South Asia accounting for approximately 90% of this population. Aside from people living in dire poverty, approximately 26% of the world’s population, equivalent to roughly 1.3 billion people, live in moderate poverty. Moderate poverty is characterized by an income range of $1.90 to $3.20 per day.
Child and PovertyÂ
Child poverty has a significant impact, as approximately half of the global population living in poverty are children under the age of 18. Childhood poverty has profound implications for children’s physical and mental health, educational attainment, and overall well-being. Furthermore, individuals raised in impoverished conditions are more likely to experience poverty in their adult lives, resulting in intergenerational repercussions.
Employment to Overcome the Poverty
Numerous nations have attempted various methods to bypass this issue. Certain programs provide individuals with the opportunity to receive benefits for a specific duration even after securing employment, whereas other programs gradually reduce advantages as income rises. These policies diminish the likelihood of falling into a welfare trap, while still reducing some financial incentives to work. Some governments offer universal benefits, such as education, childcare, and medical care, to all citizens without discrimination. One proposed solution extends the concept of universal benefits to a greater extent. A universal basic income would offer a consistent and equal benefit to every individual in society, irrespective of their wealth or employment situation.
Conclusion
Basic income has the potential to prevent individuals from experiencing poverty by establishing a secure minimum income level that ensures no one falls below it. Currently, the concept of universal basic income is primarily theoretical and has not seen widespread implementation. Although certain locations have conducted limited-scale experiments, these localized trials offer only restricted insights into the potential ramifications of the policy on a national or global scale. In order to effectively address the welfare trap, governments must prioritize the recognition and preservation of individuals’ agency and autonomy, regardless of the specific strategies they choose to implement.
Dr. Abid Hussain Nawaz Post Doc & Ph.D.
