In-work transfers in good times and bad - simulations for Ireland

In-work transfers are often seen as a good trade-off between redistribution and
efficiency, as they alleviate poverty among low-wage households while increasing
…nancial incentives to work. The present study explores the consequences of extending these transfers in Ireland, where support for low-wage households has been
of limited scope. The employment and poverty effects of alternative policies are analyzed thanks to counterfactual simulations built using a micro-simulation model,
the Living in Ireland Survey 2001 and labour supply estimations. Firstly, we study
the effect of recent extensions of the existing scheme, the Family Income Supplement
(FIS), and of its replacement by the refundable tax credit in force in the UK. Secondly, little is known about the impact of macro-level changes on the distribution of
resources at the household level, which is particularly relevant in a country deeply
affected by the current economic downturn. We suggest a preliminary analysis of
the capacity of alternative in-work transfer scenarios to cushion the negative impact
of earnings losses and cuts in the minimum wage.