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What Is a Poverty Trap?

A shanty town.
People who feel trapped by poverty are more likely to commit violent acts.
Once a person becomes trapped in homelessness, it can be extremely difficult to get back out.
Impoverished children eating watermelon.
People who grow up in poverty often trap their children in the same cycle.
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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 04 October 2014
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A poverty trap is a cycle that keeps people in a state of poverty even when they attempt to lift themselves out. A number of factors contribute to the development of such cycles and economists have developed a variety of theories for addressing poverty traps created by social and economic policy. This issue is of especially pressing concern in developing nations, where poverty rates are often very high and aid organizations are working to improve conditions for people living in poverty while also making it possible for families to get out of poverty.

In a simple example of a poverty trap, many nations with social services use means testing to determine eligibility for those services. Government assistance is often structured to allow people to survive on a marginal level, in part because it does not keep pace with inflation, and also with the stated goal of incentivizing getting off benefits rolls. A person in poverty will qualify for social services, but if that person attempts to get work, benefits will be reduced proportionally according to income, leaving the person in the same position. Individuals who get enough work to totally support themselves may find themselves paying a high marginal tax rate, again putting them right back where they started.

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Policy is not the only way to create a poverty trap. Nations with environmental problems and severe political instability can also have populations trapped in poverty by circumstances. If they try to escape those circumstances, they run into another set of problems linked with the turmoil in their nations, and may end up returning to the place they began.

People caught in poverty traps tend to give up after a certain point. After trying to escape the poverty trap and finding themselves in the same position, they return to the level where they can receive government assistance, benefits from aid organizations, and so forth. Some critics of means testing and the methods used to supply foreign aid have argued that these policies need to be changed to encourage people to escape from poverty and make it less likely that former recipients of such benefits will relapse into poverty and need assistance again.

Adjusting means testing standards, changing tax codes, making investments in the form of loans to support people trying to open businesses, and providing other forms of assistance designed to promote the development of wealth and additional income have been suggested as ways to address the poverty trap problem.

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PinkLady4
Post 8

I've watched documentaries about the life of people living in some of the countries of Africa, who get locked into a poverty trap because of environmental factors and political issues.

Africa's farm land is really depleted of nutrients and drought make it very difficult to grow anywhere enough food. Plus, this lack of good farm land causes tribal war over land.

This tribal warfare gives many Africans little time or incentive to improve their lot by starting a business or improving farming. Poverty in Africa is disgraceful.

Sometimes the waring people control the shipments of food and clothing from other countries, not giving a share to women and children. I think the tribal tradition needs to go - it doesn't work in this day and age. But I'm sure convincing the tribes to do this would be very difficult.

Saraq90
Post 7

I read a really neat book that reminded me about of the topic of this article. This was a nonfiction book whose author went out to seek what it was truly like to try and live on minimum wage.

The author left her bank account and possessions and lived just on minimum wage.

What the author found was much like this article's description that it was difficult to claw her way out from poverty while living on minimum wage.

The book and the idea of a poverty trap truly affected me when I was working just out of college for minimum wage, and I worked with people who had families!

I could not have imagined having to support anyone other than myself on the paychecks we were receiving, and at that time I was going without health insurance.

I hope we will see a poverty reduction in our lifetime!

LisaLou
Post 6

I have seen all kinds of people who are caught in a poverty trap. The effects of poverty can be different depending on if the circumstances are for a short or long period of time.

I have seen those who really try hard to make it on their own and don't want to rely on any kind of help from the government.

What they find frustrating so many times is they often get more from assistance than they do working a minimum wage job. They feel better about themselves when they are able to make it themselves, but sometimes the stresses and low wage gets to be too much and they give up.

I have seen others who try to get as much help as possible and don't have any desire to make it by themselves. Your attitude and the example you set for your kids and future generations is what can really help make a difference.

jonrss
Post 5

I heard an interesting spin on the concept of a poverty trap a few months ago. There was a researcher on the radio who was talking about the cognitive stress involved in being poor. We tend to think of the poor as stupid, but there are a lot of decisions and choices they have to make in their life that the middle and upper classes never have to make. This is, in its own way, exhausting.

The poor have to choose between paying one bill or another. hey have to memorize bus schedules. They are often dealing with the problems of extended and non traditional families. They bounce from job to job. All of this leads to a level of mental overload that people not in this situation just can' understand. Being poor is really really hard. No one want s to live like this. We would do well to always remember that.

letshearit
Post 4

A lot of elderly people are stuck in a poverty trap because getting employment actually cuts them off from a lot of old age benefits. This is a huge probable when you are barely getting by.

My father is in his seventies and is willing and able to work because of his good health. He is unable to work more than 10 hours a week though because if he makes "too much" then he is suddenly not eligible for his old age security payment.

Apparently being poor in old age is built into our system if you don't have other pensions coming in from a lucrative job when you were younger. For those who actually can and will work you are punished. Its too bad that we can't give people the benefits they have spent their whole lives paying for while still letting them work.

KaBoom
Post 3

@Azuza - I hear that. If you're poor, it's hard to stop being poor. A lot of people who are well off don't understand that when some people say they "have no money" they literally have no money!

If your paycheck only barely covers the bills, how are you supposed to buy anything else? I actually read awhile ago about a foundation that provides disadvantaged women with professional clothing, and for good reason.

Most people take their job interview suit for granted, but just imagine if you literally couldn't pay for nice clothes for work? How could you ever get a decent job if all you had to wear to an interview was raggedy old clothes? Just another poverty trap, I think.

Azuza
Post 2

With the way our economy is these days, I think it would be easy for someone to stay in poverty. Like the article said, means testing doesn't help thing.

I live with my boyfriend and we are barely scraping by with both of our incomes. We don't have any bills we can get rid of either. We've actually been without food a few times in the last few months and had to get grocery money from one of our parents.

Because of our incomes we don't qualify for any assistance, but unless we can get some money together we're never going to get out of this situation! The only job I could find is a 40 minute drive from home and my boyfriend doesn't have a car, which limits his options a lot.

manykitties2
Post 1

It seems that a lot of people under estimate the complications of being stuck in a poverty trap. There is nothing worse than working as hard as you can but still getting behind because of structural issues that keep you from reaching your goal. A good example of this is with things like unemployment insurance.

For many part-time workers, and those that work on short contracts, they will never qualify for the insurance. Also, companies can fire people before they reach the point where they apply because it keeps expenses down. This kind of behavior really makes it hard for those with minimum wage to stay employed long enough to have any protection.

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