Welfare Programs

Most societies throughout history employed some strategies to help people in poverty meet basic needs. Before the 20th century, religious groups and private charities often led such initiatives. Today, these are called welfare programs, and they usually take the form of government-provided subsidies for housing, food, energy, and health care. Typically, these programs are means-tested, meaning that only people who fall below a certain income level are eligible for benefits. This policy is designed to ensure aid goes to those who need it most, but it also means people lose access as soon as they earn more than the qualification threshold, regardless of whether or not they're financially stable enough to stay there. This vicious cycle is harmful to both those in poverty and those outside of it. Mainstream economic models assume people are rational actors who weigh the cost and benefits of their options and choose the most advantageous path forward. If those in poverty know they'll gain no net benefit from working, they're incentivized to remain on government assistance. Of course, people work for many reasons, including societal norms and personal values. But income is a major incentive to pursuing employment, and when less people take on new jobs, the economy slows down, keeping people in poverty and potentially pushing people on the cusp of poverty over the edge.