The Poverty Trade-Off

Work Incentives and Income Redistribution in Britain

Stuart Adam, Mike Brewer, and Andrew Shephard

The Poverty Trade-Off

Stuart Adam, Mike Brewer, and Andrew Shephard

Distributed for Bristol University Press

64 pages | 8 1/4 x 11 1/2 | © 2006
Paper $29.95 ISBN: 9781861348630 Published October 2006 For sale in North and South America only
Two strategies that governments have to help people on low incomes - providing them with financial support directly, and encouraging them to earn more - generally conflict. This report provides new evidence on the trade-off between redistributing income and improving work incentives.Drawing on large-scale survey data spanning the last 26 years, the report analyses the incomes and work incentives facing thousands of individuals and families, and how they are affected by the tax and benefit system. It shows how work incentives vary across the population and how this has changed since 1979 and estimates how far tax and benefit reforms have been responsible for changes in work incentives. It compares these trends with trends in poverty and inequality and examines how various policy options for the future would affect the distributions of both income and work incentives.The report is aimed at policy-makers, academics and students in the field of taxation and welfare reform, and all those who wish to improve their understanding of the trade-off between redistributing income and improving work incentives.

List of tables, figures and boxes

1. Introduction
2. Measuring financial work incentives
3. Financial work incentives in Britain: 1979 to 2005
    Work incentives in 2005
    How do work incentives in 2005 vary by family type?
    Changes in work incentives over time
    Changes in work incentives for different groups
4. Poverty, inequality and work incentives over time
5. The effects of possible tax and benefit reforms on work incentives and the distribution of income
Increasing NIC rates
    Reducing NIC rates
    Increasing income support and other safety-net benefits
    Increasing child benefit
    Increasing the starting-rate limit
    Reducing the housing benefit taper
    Increasing WTC
    Increasing the child element of CTC
    Introducing a big-family premium in CTC
    Extending the baby addition in CTC
    Comparing the reforms
6. Conclusion
Patterns in work incentives
    Work incentives and income redistribution
    Government policy and the incentives-redistribution trade-off


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