3.5 - Labour Markets: Disincentives Flashcards
1
Q
What is the Poverty Trap?
A
On low incomes, deductions increase as earnings increase
Effective wage is reduced
2
Q
How does the Poverty Trap affect labour supply?
A
Redcues overall supply
Extra hours remove benefit eligibility
3
Q
How does a rising income contribute to the poverty trap?
A
Eligibility for national insurance + income tax
4
Q
How does the poverty trap act as a disincentive?
A
Discourages search for marginally higher wages + hours worked
5
Q
What is the Unemployment Trap?
A
Prospect of losing unemployment benefits dissuades economic participation
6
Q
What are the primary labour market disincentives?
A
Unemployment Trap
Poverty Trap
Discrimination
