Working Paper Series
IFAU - Institute for Evaluation of Labour Market and Education Policy
How do income-support systems in the UK affect labour force participation?
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.
Keywords: Institutions; incentives; reforms; labour supply; disability; (follow links to similar papers)
JEL-Codes: H53; H55; I38; J08; J21; J22; J68; (follow links to similar papers)
64 pages, December 22, 2009
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