The incentive trap reminded me of this news story:
Then I did my own calculations on the matter, specifically the net income of a single parent with two children at different salary levels and benefit amounts. This trap looks quite grim and it certainly doesn’t encourage working.
Case 1:
Gross salary €1,500/month
Basic allowance €19.6/day x 21.5 days = €421/month
Child benefits 95+105 = €200/month
Housing allowance €740/month
Taxes 16.4% i.e. €315/month
Net income €2,546/month
Case 2:
Gross salary €2,500/month
Daily allowances €0/month
Child benefits €200/month
Housing allowance €545/month
Taxes 22.5% i.e. €586/month
Net income €2,659/month
So if you were working 60% hours, switching to full-time would only increase your disposable net income by €113/month.
This can also be extended upwards:
Salary 3500
Daily allowance 0
Child benefits 200
Housing allowance 209
Tax 29% i.e. 1057
Net income €2,852/month
Salary 4500
Daily allowance 0
Child benefits 200
Housing allowance 0
Taxes 33.6% i.e. 1575
Net income €3,125/month
When you triple the gross salary, the take-home pay only increases by 22%.
