PARADOX OF POVERTY

Host: Hello India and Hello World. Welcome to your favorite talk show “Around the World”. I am your host
Aanchal. Imagine that you have been unemployed and seeking work for months. Government benefit programs
have helped you cover rent, utilities, and food, but you are barely getting by. Finally, you hear back about a job
application. You receive your first paycheck in months, and things seem to be turning around-but there's a catch.
Your new job pays just enough to disqualify you from the benefit programs and not enough to cover the same
costs. To make things worse, you have to pay for transportation to work, and childcare while you are at the office.
Somehow, you have less money now than when you were unemployed. Economists call this demoralizing situation
the welfare trap- one of the many different poverty traps affecting millions of people around the world.

So here we have a renowned economist, Ms. Vaishali, with us to know more about these poverty traps and why is
it so hard to escape poverty.

Welcome to our show mam.

Interviewee: Thank you Aanchal for having me here.

Host: So, my first question to you is what are exactly poverty traps?

Interviewee: Poverty traps are economic and environmental circumstances that reinforce themselves,
perpetuating poverty for generations.

Host: What causes these poverty traps?

Interviewee: Some poverty traps are tied to an individual's circumstances, like a lack of access to healthy food or
education. Others can affect entire nations, such as cycles of a corrupt government or climate change. But the
cruel irony of welfare traps in particular is that they stem from the very policies designed to battle poverty.

Host: How is this possible that the welfare programs designed to alleviate poverty themselves cause poverty?

Interviewee: 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 healthcare. 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.

Host: How is this vicious cycle of poverty harmful to people?

Interviewee: 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 in government assistance. Of course, people work for many reasons, including societal norms and
personal values. But income is a major incentive to pursue employment. And when fewer 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.
Host: Some have suggested this feedback loop could be removed by eliminating government assistance programs
altogether. But most agree the solution is neither realistic nor humane. So how can we redesign benefits in a way
that doesn’t penalize people for working?

Interviewee: Many countries have tried different ways to circumvent this problem. Some allow people to continue
receiving benefits for a given period after finding a job, while others phase out benefits gradually as income
increases. These policies still remove some financial incentives to work, but the risk of a welfare trap is lower.
Other governments provide benefits like education, childcare, or medical care equally to all their citizens. One
proposed solution takes this idea of universal benefits even further. A universal basic income would provide a fixed
benefit to all members of society, regardless of wealth or employment status. This is the only known policy that
could entirely remove welfare traps since any earned wages would supplement the benefit rather than replace it.
In fact, by creating a stable income floor below which no one can fall, basic income might prevent people from
falling into poverty in the first place.

Host: So why not implement this solution?

Interviewee: Numerous economists and thinkers have championed this idea since the 18th century. But for now,
universal basic income remains largely hypothetical. Although it's been tried in some places on a limited scale,
these local experiments don't tell us much about how the policy would play out across an entire nation- or a
planet.

Host: Lastly, according to you how welfare policies should be designed?

Interviewee: Whatever strategy governments pursue, solving the welfare trap requires respecting people's agency
and autonomy. Only by empowering individuals to create long-term change in their lives and communities can we
begin to break the cycle of poverty.

Host: Thank you so much for sparing your valuable time for us.

Interviewee: It was my pleasure

Host: Franklin D. Roosevelt once said, “The test of our progress is not whether we add more to the abundance of
those who have much; it is whether we provide enough for those who have too little.”

So, Even though India is about to achieve its millennium development goal of eradicating extreme poverty and
hunger to halve between 1990 and 2015. Steps should be taken to achieve the goal as soon as possible. We all
should do everything possible and within our limits to help alleviate poverty in our country.

On This note, I would take leave and meet you again next week with some other topic. Till then stay happy, stay
healthy and keep watching “Around the World”.