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How do income-support systems in the UK affect labour force participation?

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  • Brewer, Mike

    () (Institute for Fiscal Studies)

Abstract

This paper reviews how income-support systems affect labour force participation in the UK. The UK’s approach to social insurance is “basic security”, with modest, typically flat-rate, benefits; insurance-based benefits are relatively unimportant. Compared with the EU, the UK has high employment rates, but a high proportion of non-workers say that they are not working through disability. In general, the low generosity of out-of-work benefits means that positive incentives to work exist for almost all benefit recipients, but weak work incentives exist for those receive Housing Benefit, and for primary earners in couples who have low earnings. Recent reforms to strengthen work incentives have altered the in-work tax credits, rather than the benefit system, and recent reforms to the out-of-work benefits have involved toughening and extending job-search requirements. The two main political parties seem to agree that future reforms will involve more conditionality, a greater use of the private sector, and a unification of the different labour market programmes.

Suggested Citation

  • Brewer, Mike, 2009. "How do income-support systems in the UK affect labour force participation?," Working Paper Series 2009:27, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  • Handle: RePEc:hhs:ifauwp:2009_027
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    File URL: http://www.ifau.se/upload/pdf/se/2009/wp09-27.pdf
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    References listed on IDEAS

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    1. David Card & Dean R. Hyslop, 2005. "Estimating the Effects of a Time-Limited Earnings Subsidy for Welfare-Leavers," Econometrica, Econometric Society, vol. 73(6), pages 1723-1770, November.
    2. Stuart Adam & James Browne, 2010. "Redistribution, work incentives and thirty years of UK tax and benefit reform," IFS Working Papers W10/24, Institute for Fiscal Studies.
    3. 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.
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    Cited by:

    1. repec:eme:ceapzz:s0573-855520140000293006 is not listed on IDEAS
    2. Aaberge, Rolf & Atkinson, Tony & Modalsli, Jorgen Heibo, 2013. "The Ins and Outs of Top Income Mobility," IZA Discussion Papers 7729, Institute for the Study of Labor (IZA).
    3. Aaberge, Rolf & Flood, Lennart, 2013. "U.S. versus Sweden: The Effect of Alternative In-Work Tax Credit Policies on Labour Supply of Single Mothers," IZA Discussion Papers 7706, Institute for the Study of Labor (IZA).
    4. Daniel Vaughan-Whitehead (ed.), 2011. "Work Inequalities in the Crisis," Books, Edward Elgar Publishing, number 14602, September.
    5. Anders, Forslund & Fredriksson, Peter, 2009. "Income support systems, labour supply incentives and employment – some cross-country evidence," Working Paper Series, Center for Labor Studies 2010:3, Uppsala University, Department of Economics.
    6. Lane Kenworthy, 2015. "Do employment-conditional earnings subsidies work?," ImPRovE Working Papers 15/10, Herman Deleeck Centre for Social Policy, University of Antwerp.
    7. Drange, Nina & Havnes, Tarjei, 2015. "Child Care Before Age Two and the Development of Language and Numeracy: Evidence from a Lottery," IZA Discussion Papers 8904, Institute for the Study of Labor (IZA).
    8. Damian Grimshaw & Anthony Rafferty, 2011. "Social Impact of the Crisis in the United Kingdom: Focus on Gender and Age Inequalities," Chapters,in: Work Inequalities in the Crisis, chapter 13 Edward Elgar Publishing.

    More about this item

    Keywords

    Institutions; incentives; reforms; labour supply; disability;

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • 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
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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