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Recent reforms of the tax and benefit systems in the framework of flexicurity

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Author Info

  • Carone, Giuseppe
  • Stovicek, Klara
  • Pierini, Fabiana
  • Sail, Etienne

Abstract

This paper provides an analysis of recent reforms of tax-benefit systems and a preliminary assessment of their impact on financial incentives to work and on labour supply. Many Member States have introduced policies to “make work pay” and have targeted low-wage workers with the aim of increasing their takehome pay. The labour market improvements observed over recent years are a sign that structural reforms have started to pay off. The reduction of disincentives to work and to hire, especially for the low-skilled, embedded in tax and benefit systems, a greater link with activation policies and a stronger reliance on preventive and targeted active labour market policies (ALMPs), and widespread wage moderation are all factors that have contributed to the structural improvement in the functioning of labour markets. Yet, despite these improvements, in view of the ageing of the population and rapid technological change, more progress is needed to further increase and maintain high levels of employment and participation rates, especially among female and older workers, and to reduce structural unemployment. Member States should continue along the line of reforms followed so far. The Commission has stressed the importance of a comprehensive strategy of labour market reforms ("flexicurity") that shift the focus from protection on the job to insurance in the market. These reforms would enable workers to move more smoothly from declining to expanding activities, thus easing tensions in the adjustment process, while ensuring adequate income support and responding to potential anxieties among European citizens.

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File URL: http://mpra.ub.uni-muenchen.de/24862/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24862.

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Date of creation: 2009
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Handle: RePEc:pra:mprapa:24862

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Related research

Keywords: Employment; Tax and benefit policies; Unemployment insurance; Labour supply; Flexicurity; Structural Reforms.;

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Cited by:
  1. European Commission, 2011. "Tax Reforms in EU Member States 2011: tax policy challenges for economic growth and fiscal sustainability," Taxation Papers 28, Directorate General Taxation and Customs Union, European Commission.
  2. Figari, Francesco, 2011. "From housewives to independent earners: can the tax system help Italian women to work?," ISER Working Paper Series 2011-15, Institute for Social and Economic Research.
  3. Alexei Izyumov, 2010. "Human Costs of Post-communist Transition: Public Policies and Private Response," Review of Social Economy, Taylor and Francis Journals, vol. 68(1), pages 93-125.
  4. Primož Dolenc & Suzana Laporšek, 2010. "Tax Wedge on Labour and its Effect on Employment Growth in the European Union," Prague Economic Papers, University of Economics, Prague, vol. 2010(4), pages 344-358.
  5. European Commission, 2011. "Taxation trends in the European Union: 2011 edition," Taxation trends 2011, Directorate General Taxation and Customs Union, European Commission.
  6. European Commission, 2009. "Taxation trends in the European Union: 2009 edition," Taxation trends 2009, Directorate General Taxation and Customs Union, European Commission.

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