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Do the UK Government’s welfare reforms make work pay

Author

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  • Stuart Adam

    () (Institute for Fiscal Studies and Institute for Fiscal Studies)

  • James Browne

    () (Institute for Fiscal Studies and Institute for Fiscal Studies)

Abstract

The UK government is in the process of introducing a radical package of welfare reforms that it hopes will encourage more people to work as well as reducing government expenditure. The largest structural change planned is the introduction of universal credit to combine six existing means-tested benefits for those of working age into a single payment, which is intended to reduce administration costs and errors, simplify claims, encourage take-up, and increase the incentive to work for those currently facing the weakest incentives. But the deficit reduction package has also involved tax changes and large benefit cuts that have an impact on financial work incentives. At the same time as these reforms have been introduced, weakness in the economy has meant that earnings have increased less quickly than benefit rates, which tends to make working less attractive. In this paper, we use micro-simulation techniques to investigate whether financial work incentives will indeed be stronger in 2015-16 than they were in 2010-11 and to separate out the impact of changes to taxes, benefit cuts and the introduction of universal credit from the impact of wider economic changes.

Suggested Citation

  • Stuart Adam & James Browne, 2013. "Do the UK Government’s welfare reforms make work pay," IFS Working Papers W13/26, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:13/26
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    File URL: http://www.ifs.org.uk/wps/wp1326.pdf
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    References listed on IDEAS

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    1. James Browne, 2012. "REWEIGHT2: Stata module to reweight survey data to user-defined control totals," Statistical Software Components S457485, Boston College Department of Economics, revised 06 Sep 2012.
    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. Mike Brewer & James Browne & Andrew Hood & Robert Joyce & Luke Sibieta, 2013. "The Short‐ and Medium‐Term Impacts of the Recession on the UK Income Distribution," Fiscal Studies, Institute for Fiscal Studies, pages 179-201.
    4. Joseph G. Altonji & Sarah Cattan & Iain Ware, 2010. "Identifying Sibling Influence on Teenage Substance Use," NBER Working Papers 16508, National Bureau of Economic Research, Inc.
    5. Mike Brewer & James Browne & Wenchao Jin, 2012. "Universal Credit: A Preliminary Analysis of Its Impact on Incomes and Work Incentives," Fiscal Studies, Institute for Fiscal Studies, pages 39-71.
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    Cited by:

    1. John Hills, 2015. "The Coalition's Record on Cash Transfers, Poverty and Inequality 2010-2015," CASE - Social Policy in a Cold Climate Working Paper 11, Centre for Analysis of Social Exclusion, LSE.
    2. repec:esr:wpaper:bp2016/1 is not listed on IDEAS
    3. Paola De Agostini & John Hills & Holly Sutherland, 2014. "Were we really all in it together? The distributional effects of the UK Coalition government's tax-benefit policy changes," CASE - Social Policy in a Cold Climate Working Paper 10, Centre for Analysis of Social Exclusion, LSE.
    4. Casey Mulligan, 2015. "Fiscal policies and the prices of labor: a comparison of the U.K. and U.S," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-27, December.
    5. Wren, Maev-Ann & Connolly, Sheelah, 2016. "Challenges in Achieving Universal Healthcare in Ireland," Papers BP2017/1, Economic and Social Research Institute (ESRI).
    6. Callan, Tim & O'Dea, Cormac & Roantree, Barra & Savage, Michael, 2016. "Financial Incentives to Work: Comparing Ireland and the UK," Papers BP2017/2, Economic and Social Research Institute (ESRI).
    7. Brewer, Mike & De Agostini, Paola, 2015. "Credit crunched: single parents, Universal Credit and the struggle to make work pay," EUROMOD Working Papers EM3/15, EUROMOD at the Institute for Social and Economic Research.
    8. Francesco Figari & Andrea Salvatori & Holly Sutherland, 2010. "Economic downturn and stress testing European welfare systems," Working Papers 028, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
    9. repec:kap:jecinq:v:15:y:2017:i:4:d:10.1007_s10888-017-9365-7 is not listed on IDEAS

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