Would you work for $5 an hour? Low Income Benefits

Redwing posted an article about family income vs Aged Pension and one thing in the article was this statement

"Going from the Low to Medium scenario requires the family to have an additional $13,000 net income. To get that, however, they have to earn an additional $32,000 of gross income."
How much does a family need to earn to be as well off as an age pensioner? (fresheconomicthinking.com)

It seems wrong doesnt it? earn $32,000 to net $13,000 at a modest income level (59% tax) but it is largely because of the benefit reduction and drop off.

Something I have been looking into recently is that drop off in government benefits based on income which to my mind is a disincentive for people on lower income to work.

All based on partnered couple with 2 kids
Tax A
When combined income is higher than $62,634 you lose 20c/$1 earnt
Tax B
When lower income earner's income goes above $6,497 you lose 20c/$1 earnt
Tax A Supplement
When combined income goes above $80,000 you lose the $1,635 once a year payment.
Jobseeker
When you earn between $150 and $256 a fortnight Jobseeker is reduced by 50c/$1 earnt over $150
When you earn over $256 a fortnight Jobseeker is reduced by 60c/$1 earnt
When your partners income is over $1,325/fortnight Jobseeker is reduced by 60c/$1 earnt
Tax
When you earn more than $18,200 you pay 19c/$1 earnt

State benefit - School Card (SA)
When your income goes above $72,262 you lose the benefit of the state paying school fees. Could be between $300 and $600/year/child

Low Income Health Care Card benefits
Child care Subsidy
I am sure there are more

Now some will say that these benefits are for low income earners and as you earn more you should take on more of the financial burden and I dont disagree with that. My point here is the actual disincentive to work.

Imagine working an extra day and...
paying 19c/$1 in tax
Tax A reduced by 20c/$1
Jobseeker reduced by 60c/$1
possibly more reductions

Why bother? Where is the incentive to work for free or even $5/hour? Because that is the real in-hand result for many low income earners. They are also often very income sensitive and are very aware that putting effort into work is often a zero sum game. They dont see that they will ever earn enough to push out the other side past all the benefit reductions and into a level of 'life improving' income so why bother?

Would you work for $5 an hour or rather just go to the beach? More importantly, what do you think the majority of low income earners would do?

 

the incentive i would imagine, is to build a career, get the experience to work one's way to higher paying jobs or opportunities and get ahead in life...Similar to properties that are low cash flow but higher growth potential (aka land banking) ... is the way i see it.

 

There was an interesting interview on TV years ago where a young person at their first job was only earning about $50 a week above what they got on unemployment benefits. Their attitude was “why work for $50 a week?” Attitude supported by their mother so they quit the job.

Interviewers returned to the workplace about a month later to interview the new young person behind the desk. The interviewer asked “why are you working when you are only earning $50 above the dole?”

Answer?

“But I am just starting out. It won’t be long before I am earning more.”

 

And this applies across all the wage brackets as the monetary incentive to work more is not there after a certain amount of wealth.

Eg
Why would someone making 100k pa net (140k gorss)doing not much go to work a full week to earn 240k (an extra 100k) and only have 154k after tax?
All that hassle for half the pay earnt.
And if they're really good an able to earn an extra 200k or 300k total, they end up with 188k after tax.
200k extra earnings reduced to only 88k.
And if you're an employee 33k must be deducted and you can't have till ya 60yo.