Why do current anti-poverty programmes discourage work?
Correct answerA. Benefits are reduced at such a high rate when recipients earn more income that there is little or no incentive to work once receiving benefits
Explanation
Means-tested support is withdrawn as earnings rise, acting like a high marginal tax on extra work. When the withdrawal rate is steep, an extra hour of work raises net income very little.
Correct answerC. A situation in which those receiving state benefits may be almost no better off if they work more, because doing so reduces the benefit income they are entitled to and increases the tax they pay
Discussion