Almost 5,000 Westcountry couples with children are set to lose around £4,000 a year unless they work significantly longer hours, new figures show.
A little-noticed change to tax credit rules means the families of almost 10,000 children will lose all of their working tax credits, according to an analysis of Government figures by Labour.
The change will "trim" the spending power of struggling families in the region by around £20 million.
From April, couples with children earning less than around £17,700 will need to increase the number of hours they work from a minimum of 16 to 24 hours per week or they will lose all their working tax credit of £3,870 per year.
Labour says working longer will be difficult during the economic downturn and points to a recent survey by the Chartered Institute for Personnel and Development, which found that just 6% of organisations were increasing hours for workers.
Alison Seabeck, Labour MP for Plymouth Moor View, where 360 households and 725 children will lose out, said the "ill thought-out move" would cause upheaval for families struggling to juggle work and childcare.
"This hits spending power and that is where the Government has got this really wrong – people will not be able to buy things or grow businesses," she added.
"There is a real risk that child poverty will be pushed up even further – it is short-sighted to take people's income away as it affects local economies."
The 18 parliamentary constituencies in Devon and Cornwall contain 4,760 households currently receiving payments for 9,510 children, a breakdown shows.
Hardest-hit is the Cornish constituency of Conservative MP George Eustice in Camborne, Redruth and Hayle, where 370 families and 780 children affected.
Torbay also contains more than 700 children affected and Plymouth's two electoral wards will see a total of 675 couples and 1,390 children hit.
In neighbouring South West Devon, the seat of Conservative MP Gary Streeter, 215 families will lose out, affecting 465 children.
Mr Streeter told the Western Morning News that the figures were "only part of the story" and cited council tax freezes and increased tax thresholds as positive moves to help "people at the bottom of the pile".
"Over the years I have had so many people saying it is ridiculous that it is kept at 16 hours a week and would enjoy the freedom of working more and building a better work pattern," he said.
"People will accept it as they accept that the public finances are in dire straits and we have to trim where we can and make the numbers stack up."
Details emerged after Government figures revealed in parliamentary answers to a shadow Treasury minister showed that 212,000 households could lose out nationwide, including 470,000 children.