Welfare to Work, Wages and Wage Growth*

Abstract

This paper attempts to uncover the effects of a UK welfare‐to‐work programme on individual wage growth by exploiting an expansion to this welfare programme. The conventional wisdom is that such programmes trap recipients into low‐wage, low‐quality work – this comes from the simple argument that the ‘poverty trap’, which a wage subsidy for low‐income workers induces, reduces the benefits to investments, such as on‐the‐job training, and so reduces wage growth. In fact, a wage subsidy will also reduce the costs of, at least, general training because we would normally expect workers to pay for their own general training in the form of lower gross wages. So a wage subsidy is a way of sharing these costs with the taxpayer. Thus, the net effect on wage progression depends on whether it reduces costs by more or less than it reduces the benefits.

Income Taxes and the Composition of Pay: Evidence From the British Household Panel Survey

“…The WFTC differs from its predecessor in two key aspects: it is more generous – it increases both the credits for adults and children and the applicable amount, and also reduces the credit withdrawal taper – and is a tax credit administered by the Inland Revenue, rather than a traditional income‐related cash benefit administered by the Benefits Agency. The WFTC benefited around 1.271 million households in 2001, compared with the 817 thousands reached by FC in 1999 – see Lydon and Walker (2004). 27…”

Aktivnosti u odabranim zemljama u poticanju isplativosti rada

“…Prema više istraživanja sustav (Dilnot i McGrae, 2000.;European Commission, 2005.b;Lydon i Walker, 2005.). WTC ima pozitivne učinke na ponudu rada.…”

“…PREPORUKE U članku smo izložili konceptualnu i tehničku složenost proučavanja isplativosti rada koja ovisi o materijalnim poticajima ili nepovoljnim utjecajima. Literatura o potrebnom povećanju dohotka da bi se ostvarila isplativost rada nije jednoznačna, ali se najčešće navodi da povećanje dohotka mora biti barem 10% (Lydon i Walker, 2005.;European Commission, 2005.a). Ipak, većina istraživača (European Commission, 2005. b; Group of Experts on Making Work Pay, 2003.)…”

In-Work Benefits: Effective Social Protection or ‘Emperor's New Clothes’?

“…The UC reform aims to restructure the benefit system, to create one single incomereplacement benefit for working-age adults which will unify the current schemes of means-tested out-of-work benefits, tax credits and support for housing. 11 It aims to improve work incentives by allowing individuals to keep more of their income as they move into work, and by introducing a smoother and more transparent reduction of 8 Lydon and Walker (2005) examined issues such as rate of wage growth, job tenure and job changing for FC/WFTC recipients using panel data, but without being able to come to any very clear conclusions due to small sample sizes.…”