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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.

Suggested Citation

  • Mike Brewer, 2001. "Comparing in-work benefits and the reward to work for families with children in the US and the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 22(1), pages 41-77, January.
    • Handle: RePEc:ifs:fistud:v:22:y:2001:i:1:p:41-77
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    References listed on IDEAS

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    1. Blank, Rebecca M. & Card, David & Robins, Philip K., 1999. "Financial Incentives for Increasing Work and Income Among Low-Income Families," Department of Economics, Working Paper Series qt2f15x7sg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    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;National Tax Journal, vol. 53(4), pages 1211-1244, December.
    3. 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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