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The Poverty Trap After the Fowler Reforms

In: Improving Incentives for the Low-Paid

Author

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  • Patrick Minford

Abstract

What is the aim of income-support systems? I shall take it that, in the eyes of the voter who pays for them and whose judgement is therefore paramount, the aim is to help the poor without damaging incentives more than necessary. That there is a trade-off between poverty-relief and incentives seems unavoidable; the relevant question is how to improve it and where to be located along that best trade-off. The method used in this chapter for assessing this trade-off is to compute efficiency losses of various proposals, assuming that they are all constrained to provide a minimum living standard to those in need. No account otherwise is taken of distributional aspects: it is assumed that there is no desire to reduce inequality for its own sake, over and above the provision of such minimum help. Efficiency losses are computed in the usual manner of public finance by assessing the income-compensated effects on supply and the consequent ‘welfare triangles’. Given that they are all subject to the constraint of providing the same minimum support (the ‘safety net’), the proposals are judged purely by their efficiency or welfare loss.

Suggested Citation

  • Patrick Minford, 1990. "The Poverty Trap After the Fowler Reforms," Palgrave Macmillan Books, in: Alex Bowen & Ken Mayhew (ed.), Improving Incentives for the Low-Paid, chapter 4, pages 121-138, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-21012-1_4
    DOI: 10.1007/978-1-349-21012-1_4
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