Sunday, September 15, 2013

Poverty trap calculator

One of the things we should be able to do, but are not able to do, is to calculate individual poverty trap curves in the HR department of companies that employ the working poor. Since we can't do that at present, raises blindly push a lot of less than well informed people into hitting high effective marginal tax rate poverty traps creating large amounts of frustration all around as workers react in unexpected ways as they hit the traps.

To fix this, you'd have to map out all governments who offer poverty relief and stick that data into a GIS server so that entering an address will give you a list of the relevant governments. You would also need a list of all the relevant programs, their cutoff rules, and how much people can qualify for in aid at which income levels and what family circumstances. 

Put all that together and you should be able to set up compensation programs that are far more tailored to the individuals and allow them to defer income so that they get it at termination, in case of emergency, or compressed in a way that gets them past these pernicious poverty traps.