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Comparing in-work benefits and the reward to work for families with children in the US and the UK

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  • Mike Brewer

    ()
    (Institute for Fiscal Studies)

Abstract

The income transfer systems for low-income families in the US and the UK try both to reduce poverty and to encourage work. In-work benefits are a key part of both countries' strategies through the earned income tax credit and the working families' tax credit (and predecessors) respectively. But tax credits are only one part of the whole tax and welfare system. In-work benefits, taxes and welfare benefits combine in both countries to provide good financial incentives for lone parents to do minimum-wage work, but poorer incentives to increase earnings further. But direct comparisons of budget constraints hide important points of detail. First, not enough is known about what determines take-up of in-work benefits. Second, the considerable differences in assessment and payment mechanisms and frequency between EITC and WFTC mean that low-income families in the US and the UK may respond very differently to apparently similar financial incentives.

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Bibliographic Info

Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 22 (2001)
Issue (Month): 1 (January)
Pages: 41-77

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Handle: RePEc:ifs:fistud:v:22:y:2001:i:1:p:41-77

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Related research

Keywords: welfare-to-work; New Deal; tax credits; in-work benefits;

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  1. Rebecca M. Blank & David Card & Philip K. Robins, 1999. "Financial Incentives for Increasing Work and Income Among Low-Income Families," JCPR Working Papers, Northwestern University/University of Chicago Joint Center for Poverty Research 69, Northwestern University/University of Chicago Joint Center for Poverty Research.
  2. Barrow, Lisa & McGranahan, Leslie, 2000. "The Effects of the Earned Income Credit on the Seasonality of Household Expenditures," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 1211-44, December.
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