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Beans for breakfast? How exportable is the British workfare model?
Author(s)
Date Issued
2006-03
Date Available
2008-09-29T16:29:55Z
Abstract
Social assistance and inactivity traps have long been considered amongst the main causes of the poor employment performance of EU countries. The success of New Labour has triggered a growing interests in instruments capable of combining the promotion of responsibility and self-sufficiency with solidarity with less skilled workers. Making-work-pay (MWP) policies, consisting of transfers to households with low earning capacity, have quickly emerged as the most politically acceptable instruments in tax-benefit reforms of many Anglo Saxon countries. This chapter explores the impact of introducing the British Working Families' Tax Credit in three EU countries with rather different labor market and welfare institutions:
Finland, France and Germany. Simulating the reform reveals that, while first round effects on income distribution is considerable, the interaction of the new instrument with the structural characteristics of the economy and the population may lead to counterproductive second round effects (i.e. changes in economic behavior). The implementation of the reform, in this case, could only be justified if the social inclusion (i.e.
transition into activity) of some specific household types (singles and single mothers) is valued more than a rise in the employment per se.
Finland, France and Germany. Simulating the reform reveals that, while first round effects on income distribution is considerable, the interaction of the new instrument with the structural characteristics of the economy and the population may lead to counterproductive second round effects (i.e. changes in economic behavior). The implementation of the reform, in this case, could only be justified if the social inclusion (i.e.
transition into activity) of some specific household types (singles and single mothers) is valued more than a rise in the employment per se.
Sponsorship
Improving Human Potential programme of the European Commission (SERD-2001-00099)
Type of Material
Working Paper
Publisher
The Institute for the Study of Labor (IZA)
Series
IZA Discussion Paper Series
No. 2025
Copyright (Published Version)
The Institute for the Study of Labor (IZA) 2006
Classification
C25
C52
H31
J22
Subject – LCSH
Taxation--Europe
Labor supply--Europe
Employment subsidies--Great Britain
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
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bargaino_workpap_005.pdf
Size
290.44 KB
Format
Adobe PDF
Checksum (MD5)
857a99ed2448dc9221d852ae80997c2d
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