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A Good Time for Making Work Pay? Taking Stock of In-Work Benefits and Related Measures across the OECD

Listed author(s):
  • Herwig Immervoll


  • Mark Pearson


The twin problem of in-work poverty and persistent labour market difficulties of low-skilled individuals has been one of the most important drivers of tax-benefit policy reforms in OECD countries in recent years. Employment-conditional cash transfers to individuals facing particular labour-market challenges have been a core element of “make-work-pay” policies for some time and are now in use in more than half of the OECD countries. They are attractive because they redistribute to low-income groups while also creating additional work incentives. But like all social benefits, they have to be financed, which creates additional economic costs for some. This paper discusses the rationale for in-work benefits (IWB), summarises the main design features of programmes operated in OECD countries, and provides an update of what is known about their effectiveness in terms of reducing inequalities and creating employment. As policies aiming to promote self-sufficiency, wage subsidies and minimum wages share a number of the objectives associated with IWB measures. We review evidence on the effectiveness of minimum wages and wage subsidies and discuss links between these policies and IWBs. Finally, we outline some potential consequences of weakening labour markets for the effectiveness of make-work-pay policies. Le double problème de la pauvreté touchant même les personnes pourvues d’un emploi et de la persistance des difficultés rencontrées par les travailleurs peu qualifiés sur le marché du travail a été l’un des moteurs les plus importants de la réforme des politiques en matière de fiscalité et de prestations menée ces dernières années dans les pays de l’OCDE. Depuis un certain temps, les prestations en espèces subordonnées à l’exercice d’un emploi (accordées aux personnes confrontées à des difficultés particulières sur le marché du travail) sont devenues une composante essentielle des politiques de valorisation du travail. Aujourd’hui, plus de la moitié des pays de l’Organisation les ont mises en place. Ces prestations sont attrayantes car elles ont un effet de redistribution sur les groupes à faible revenu tout en créant de nouvelles incitations à travailler. Mais, à l’instar de toutes les prestations sociales, elles doivent être financées, ce qui alourdit les coûts économiques pour certains. Ce document examine le bien-fondé des prestations soumises à l’exercice d’un emploi, résume les principales caractéristiques de la conception des programmes mis en place dans les pays de l’OCDE, et fait le point de ce que l’on sait de leur efficacité sur le plan de la réduction des inégalités et de la création d’emploi. En tant que mesures destinées à promouvoir l’autonomie économique, les subventions salariales et les salaires minimums ont un certain nombre d’objectifs en commun avec les prestations soumises à l’exercice d’un emploi. Nous passons en revue des données d’observation sur l’efficacité des subventions salariales et des salaires minimums et examinons les liens entre ces mesures et les prestations en question. Enfin, nous mettons en évidence certaines conséquences possibles du fléchissement du marché du travail sur l’efficacité des politiques de valorisation du travail.

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Paper provided by OECD Publishing in its series OECD Social, Employment and Migration Working Papers with number 81.

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Date of creation: 20 Mar 2009
Handle: RePEc:oec:elsaab:81-en
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