A poverty trap occurs when people who receive government benefits find it difficult to improve their financial situation through work. Because benefits are reduced as income rises—sometimes by more than 80%—earning more money does not significantly increase their total take-home pay.

This creates several issues:

• Reduced incentive to work: Individuals may choose not to work or seek higher pay because the financial gain is too small.
• Cycle of dependency: It becomes harder for people to break free from relying on government support.
• Persistent poverty: This cycle maintains long-term financial hardship.
• Fiscal inefficiency: Government resources are not being used effectively to help people become self-sufficient.