November 19, 2009

Living in the Poverty Trap

This blog isn't normally for self-confession. But I read an article that I know applies to more people than me, so I had to share it. When you earn less than $25,000 a year you fall near enough the federal poverty level that there are a lot of safety nets you can take advantage of. Sure, it's no picnic living that close to poverty and most are trying their best to climb up the economic ladder. But what happens to your earning power as your income rises? Turns out that between $25,000 and about $45,000 there are a couple 'dips' where tax increases and loss of those safety nets actually means you are effectively bringing home less income than when you were earning $25,000. (This varies by cost of living in your area and a few other factors, of course.)

Megan Cottrell pulls together a few reports to paint a clearer picture of the Poverty Trap. As she says, don't fall in, you may never get out. What Megan describes is so familiar to me. As someone who spent a lot of his career as a 'coordinator', 'specialist', or entry level manager my earnings have been right around that part of the dip where it's just impossible to get out. Everytime you earn a little raise you actually fall farther into debt.

I'm not complaining, I know what I need to do to make it over the hump. I'm working on it. But someone does really need to look closely at the tax and support structure and make sure it no longer penalizes those in the poverty trap. Also, the actual cost of living for a metro area needs to be taken into account.

Go read the original post from an Obama administration economic official to see your government policy makers in action.

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