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Combating In-Work Poverty in Continental Europe: An Investigation Using the Belgian Case

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Author Info

  • Marx, Ive

    ()
    (University of Antwerp)

  • Vanhille, Josefine

    ()
    (University of Antwerp)

  • Verbist, Gerlinde

    ()
    (University of Antwerp)

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Abstract

Recent studies find in-work poverty to be a pan-European phenomenon. Yet in-work poverty has come to the fore as a policy issue only recently in most continental European countries. Policies implemented in the United States and the United Kingdom, most notably in-work benefit schemes, are much discussed. This article argues that if it comes to preventing and alleviating poverty among workers, both the policy options and constraints facing Continental European policymakers are fundamentally different from those facing Anglo-Saxon policymakers. Consequently, policies that work in one setting cannot be simply emulated elsewhere. We present micro-simulation derived results for Belgium to illustrate some of these points. Policy options discussed and simulated include: higher minimum wages, reductions in employee social security contributions, tax relief for low-paid workers, and the implementation of a stylised version of the British Working Tax Credit. The latter measure has the strongest impact on in-work poverty but in settings where wages are compressed, as in Belgium, a severe trade-off between coverage and budgetary cost presents itself. The article concludes that looking beyond targeted measures to universal benefits and support for employment of carers may be important components of an overall policy package to tackle in-work poverty.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6067.

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Length: 26 pages
Date of creation: Oct 2011
Date of revision:
Publication status: published in: Journal of Social Policy, 2012, 41 (1) 19-41
Handle: RePEc:iza:izadps:dp6067

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Keywords: negative income taxes; in-work poverty; low pay; in-work benefits;

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References

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  1. Dolado, Juan José & Felgueroso, Florentino & Jimeno, Juan F., 2000. "The Role of the Minimum Wage in the Welfare State: An Appraisal," IZA Discussion Papers 152, Institute for the Study of Labor (IZA).
  2. Brewer, Mike & Duncan, Alan & Shephard, Andrew & Suarez, Maria Jose, 2006. "Did working families' tax credit work? The impact of in-work support on labour supply in Great Britain," Labour Economics, Elsevier, vol. 13(6), pages 699-720, December.
  3. Corak, Miles & Lietz, Christine & Sutherland, Holly, 2005. "The Impact of Tax and Transfer Systems on Children in the European Union," IZA Discussion Papers 1589, Institute for the Study of Labor (IZA).
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Cited by:
  1. Brown, Alessio J. G. & Koettl, Johannes, 2012. "Active Labor Market Programs: Employment Gain or Fiscal Drain?," IZA Discussion Papers 6880, Institute for the Study of Labor (IZA).

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