1887

OECD Social, Employment and Migration Working Papers

This series is designed to make available to a wider readership selected labour market, social policy and migration studies prepared for use within the OECD. Authorship is usually collective, but principal writers are named. The papers are generally available only in their original language - English or French - with a summary in the other.

English, French

A Good Time for Making Work Pay? Taking Stock of In-Work Benefits and Related Measures across the OECD

The twin problem of in-work poverty and persistent labour market difficulties of low-skilled individuals has been one of the most important drivers of tax-benefit policy reforms in OECD countries in recent years. Employment-conditional cash transfers to individuals facing particular labour-market challenges have been a core element of “make-work-pay” policies for some time and are now in use in more than half of the OECD countries. They are attractive because they redistribute to low-income groups while also creating additional work incentives. But like all social benefits, they have to be financed, which creates additional economic costs for some. This paper discusses the rationale for in-work benefits (IWB), summarises the main design features of programmes operated in OECD countries, and provides an update of what is known about their effectiveness in terms of reducing inequalities and creating employment. As policies aiming to promote self-sufficiency, wage subsidies and minimum wages share a number of the objectives associated with IWB measures. We review evidence on the effectiveness of minimum wages and wage subsidies and discuss links between these policies and IWBs. Finally, we outline some potential consequences of weakening labour markets for the effectiveness of make-work-pay policies.

English

JEL: J20: Labor and Demographic Economics / Demand and Supply of Labor / Demand and Supply of Labor: General; H24: Public Economics / Taxation, Subsidies, and Revenue / Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes; H31: Public Economics / Fiscal Policies and Behavior of Economic Agents / Fiscal Policies and Behavior of Economic Agents: Household; J30: Labor and Demographic Economics / Wages, Compensation, and Labor Costs / Wages, Compensation, and Labor Costs: General
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