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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
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Work Incentives and Universal Credit
Reform of the Benefit System in the United Kingdom
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- Jon Kristian Pareliussen1
- Author Affiliations
- 1: OECD, France
- 08 Mar 2013
- Bibliographic information
Under the Universal Credit reform, the main means-tested benefits except the Council Tax Benefit will be pooled into one single benefit with one single taper rate. The reform will give people better incentives to work, reduce complexity and contribute to reducing poverty. The reform could reduce the number of workless households by between 45 000 and 240 000 and increase labour supply by the equivalent of 15 000-85 000 full-time employees. Increased take-up and increased entitlements for low income families will further reduce poverty and increase equality. However, the cost of childcare remains high even after taking childcare benefits into account. Despite significant improvements, childcare expenses will continue to be a hurdle to progress in work for second earners and lone parents, even after the Universal Credit reform.
- United Kingdom, Universal credit, child care, welfare reform, work incentives, lone parents, poverty, benefit system, inequality, second earners
- JEL Classification:
- D31: Microeconomics / Distribution / Personal Income, Wealth, and Their Distributions
- H31: Public Economics / Fiscal Policies and Behavior of Economic Agents / Household
- H55: Public Economics / National Government Expenditures and Related Policies / Social Security and Public Pensions
- I38: Health, Education, and Welfare / Welfare, Well-Being, and Poverty / Government Policy ; Provision and Effects of Welfare Programs