Wealth – stock of assets e.g. savings, house, car etc.
Income – money received on a regular basis e.g. from job, dividends or welfare payments
The poverty trap is a mechanism which means the poor are forced to stay on low income and cannot escape from poverty. Often this is because benefits are more generous than wages available than if they were working so there is a disincentive to work. As well as this, if income tax is high, they may end up getting less than they would on welfare payments.
- Increase income tax – progressive taxation as higher tax earners pay more (income tax brackets)
- Tax credits – Gov. payment to lower earners
- Increase benefits – lower income families benefit more
- Indirect measures e.g. apprenticeships improve skills level etc.