Active labour market policy vs employment tax credits: lessons from recent UK reforms
AbstractMany welfare-to-work programs in both North America and Europe are directed at making work pay for the low skilled. This paper identifies two alternative policies that are motivated by this same objective – active labour market programs that involve wage subsidies together with improved job matching; and earned income tax credits that supplement wages for working low-income families. Although sharing similar concerns over labour market incentives for low skilled workers, these alternative policies typically differ in many important ways. We present an evaluation of the impacts of two such recent programs designed to enhance the labour market attachment of low-wage workers in the UK. These programs have many features in common and are similar to many policy proposals in Europe and North America. The evaluation of the UK reforms brings empirical evidence into the debate on the effectiveness of these programs and is used to assess what aspects of their design work well and what aspects could be improved.
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Bibliographic InfoPaper provided by IFAU - Institute for Evaluation of Labour Market and Education Policy in its series Working Paper Series with number 2002:1.
Length: 27 pages
Date of creation: 15 Jan 2002
Date of revision:
Publication status: Published in Swedish Economic Policy Review, 2001, pages 239-266.
welfare reform; tax credits; wage subsidies; labour supply;
Find related papers by JEL classification:
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-03-04 (All new papers)
- NEP-LTV-2002-03-04 (Unemployment, Inequality & Poverty)
- NEP-PBE-2002-03-04 (Public Economics)
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