The Truth About Economic Disincentives

Does no one out there, left or right, understand? Everyone needs to understand the truth about economic disincentive, not just because it affects our economy in very significant ways, but because it is easy for us to get into circumstances where we can be hurt by it if we do not. But most people do not.

Hot Topic — Economic Disincentive

When the CBO (Congressional Budget Office) reported that the Affordable Health Care Act resulted in an economic disincentive projected to cause a loss equivalent to 2.3 million jobs, it produced a storm of political comment. Most of it has been uninformed.


On the one hand, supporters of the program have tried to make lemonade out of a lemon, so to speak. They have gone so far as to suggest this would free up artists to fulfill their dreams and parents to have the opportunity to spend more time at home with their children.

On the other hand, those on the other side have suggested that this means deadbeats are incentivized to avoid honest work. Instead they will sponge off their fellow citizens and further weaken the economy in general.

Neither of these positions reflect any understanding of what an economic disincentive is and how it works in the real world.

What Are Economic Disincentives

Being an economic disincentive in this situation actually means that more people will be trapped in poverty. This is in addition to the disincentives already inherent in most social assistance programs.


It means an economically stressed out single mom working twenty-five hours a week at barely above minimum wage, with two kids who need medical care, will be afraid to work a few more hours or take a different job that pays a bit better. How can this be?

This is the way these things work: when she earns another $100.00 a month she will have to pay $200.00-300.00 more for health care, food, and rent because her subsidies will go down. All this when she can hardly get by the way it is. So she reluctantly declines to earn more getting scorn from those who do not understand and feeling even more depressed than before.

This happens, unfortunately, with most social welfare programs. It is what keeps most poor people poor. Every time they try to break out they get smacked down.

An economic disincentive does not mean encouraging people not to work by making it easy to choose to be lazy. Nor does it mean freeing people to choose the life of an artist or a stay at home parent over work. An economic disincentive means punishing people for trying to improve themselves. It is the norm for most of these programs and it creates an entirely avoidable loss of hope.

Better an Economic Incentive

Whether it is in consideration of the Affordable Care Act, or any public program that affects people economically, it is my considered opinion that they should be designed specifically so that whenever any individual participates they are free to improve their lives without losing more than they gain.

stack of money

Fixing this problem should not be impossible if there is a will. If there is any economic influence, it should be an incentive to do better, not a disincentive.

Assistance programs need to be coordinated in some fashion on the local level. Any time a person gets aid from the government of any kind and earns another dollar they should get to keep fifty cents, or at least gain some benefit.

Overcoming Economic Disincentive

Because of my work I have had an opportunity to closely observe the disincentive built into assistance programs for years. Of all the economic needs that face our world, this is one of the most pressing to fix. Only when the public discovers the real nature of the problem, however, will this ever be possible. Perhaps this article will help a little to spread the word.