USING BUDGET CONSTRAINTS TO ILLUSTRATE POVERTY TRAPS - THE CASE OF YOUNG PART-TIME WORKERS IN AUSTRALIA

Although much is known about the incidence of unemployment in Australi a over the recent past, the causes of unemployment remain controversia l. Various explanations have been advanced, some of which focus on the unemployment benefits system. The present study examines the problem of high effective marginal tax rates faced by young social security re cipients wishing to engage in part-time employment, and the resultant emergence of so-called 'poverty traps'. We examine budget constraint f or unemployed eighteen year olds, both singles and couples, for part-t ime employment in four low income occupations; namely, brickie's labou rer public service clerk, stationhand and sales assistant. The results indicate that pervasive disincentive effects exist for young people s eeking low wage employment.