amount instead. Imposing requirements for work as a condition of receiving benefits and setting a time limit

on benefits can also reduce the harshness of the poverty trap.

Figure 15.4 illustrates a government program that guarantees $18,000 in income, even for those who do not

work at all, but then reduces this amount by 50 cents for each $1 earned. The new, higher budget line in Figure

15.4 shows that, with this program, additional hours of work will bring some economic gain. Because of the

reduction in government income when an individual works, an individual earning $8.00 will really net only
$4.00 per hour. The vertical intercept of this higher budget constraint line is at $28,000 ($18,000 + 2,500 hours

× $4.00 = $28,000). The horizontal intercept is at the point on the graph where $18,000 and 2500 hours of

leisure is set. Table 15.4 shows the total income differences with various choices of labor and leisure.
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