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Work Incentives and Universal Credit: Reform of the Benefit System in the United Kingdom

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  • Jon Pareliussen

    (OECD)

Abstract

Under the Universal Credit reform, the main means-tested benefits except the Council Tax Benefit will be pooled into one single benefit with one single taper rate. The reform will give people better incentives to work, reduce complexity and contribute to reducing poverty. The reform could reduce the number of workless households by between 45 000 and 240 000 and increase labour supply by the equivalent of 15 000-85 000 full-time employees. Increased take-up and increased entitlements for low income families will further reduce poverty and increase equality. However, the cost of childcare remains high even after taking childcare benefits into account. Despite significant improvements, childcare expenses will continue to be a hurdle to progress in work for second earners and lone parents, even after the Universal Credit reform. Incitations à travailler et « Crédit Universel » : Réforme du système de prestations sociales au Royaume-Uni Dans le cadre de la réforme «Crédit Universel», les principales prestations sociales sous conditions de ressources, à l'exception de la prestation liée aux impôts locaux (Council Tax Benefit) seront regroupées en une prestation unique avec un taux de réduction unique. La réforme fournira de meilleures incitations à travailler, réduira la complexité et contribuera à réduire la pauvreté. La réforme pourrait réduire le nombre de ménages sans emploi de 45 000 à 240 000 et augmenter l'offre de travail de l’équivalent de 15 000 à 85 000 employés à temps plein. Une augmentation du recours aux prestations et l'augmentation des droits pour les familles à faible revenu va davantage réduire la pauvreté et accroître l'égalité. Cependant, le coût de la garde d'enfants reste élevé, même après prise en compte des prestations liées à la garde d'enfants. Malgré des améliorations notables, les frais de garde d'enfants resteront un obstacle à l’évolution professionnelle des seconds apporteurs de revenu et des parents isolés, même après la réforme « Crédit Universel ».

Suggested Citation

  • Jon Pareliussen, 2013. "Work Incentives and Universal Credit: Reform of the Benefit System in the United Kingdom," OECD Economics Department Working Papers 1033, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1033-en
    DOI: 10.1787/5k49lcn89rkf-en
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    Cited by:

    1. Lane Kenworthy, 2015. "Do employment-conditional earnings subsidies work?," ImPRovE Working Papers 15/10, Herman Deleeck Centre for Social Policy, University of Antwerp.

    More about this item

    Keywords

    benefit system; child care; Crédit Universel; garde d'enfants; incitation à travailler; inequality; inégalités; lone parents; parents isolés; pauvreté; poverty; prestation universelle; Royaume-Uni; réforme de la protection sociale; second earners; seconds apporteurs de revenu; système de prestations sociales; United Kingdom; Universal credit; welfare reform; work incentives;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • 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

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