Has Labour made work pay?

A review of the Labour Government's success in improving the financial reward to work for low-income families. Since 1997, the Labour Government has instigate a series of reforms aimed at helping to make work pay more than not working, and to make work pay enough to help families avoid poverty. This report is the first to provide an overview of all such policies since 1997, and to provide an impartial analysis of the evidence of the Government's success to date. The report examines the key outcomes targeted by 'make work pay' policies, showing trends in the proportion of parents in employment, and the number of children in households where no adult is in paid work. It reviews studies which estimate the contribution that government policies made to these changes. And it provides new evidence on the impact of changes to personal taxes, tax credits and benefits on measures of financial work incentives. The authors also anticipate where this policy agenda might take the Government in the future

Employment and the labour market

Since 1997, there have been changes in rates of employment, unemployment and inactivity. These changes have coincided with the Labour government's "Making Work Pay" agenda, which has seen the introduction of in-work tax credits, the national minimum wage and various New Deal programmes. Section 2 gives details of how the rates of employment, unemployment and economic inactivity have changed under the Labour government. Section 3 begins by detailing the national minimum wage and presents evidence on its impact, and continues in a somewhat similar vein, analysing the New Deal programmes and in-work tax credits. In Section 4, we show how financial work incentives have changed since 1997, and we briefly analyse the employment proposals of the main parties in Section 5. Finally, Section 6 concludes

Sharing in the nation’s prosperity? Pensioner poverty in Britain

This commentary reviews the government’s tax and benefit reforms affecting pensioners to date, and examines the evidence from the latest official low income figures on the government’s record on pensioner poverty so far

How has child poverty changed since 1998-99? An update

An additional 100,000 children were lifted out of poverty on the most commonly cited of the government's relative poverty measures between 2000-01 and 2001-02. The most recent figures show 3.8 million children (roughly 30 per cent of all children) in Britain in households with income below 60 per cent of the median income after housing costs. Although this means that almost one in three children in Britain live in poverty on this definition, this is the lowest level recorded since 1991. Since the Labour government came to power, the total drop in the numbers in child poverty has been around 500,000. In 1998-99, the government set a target for child poverty in 2004-05. If the rate of decline in child poverty observed since 1998-99 continues for three more years, then the government will miss this target. Indeed, it is now further behind schedule than it was based on figures from 2000-01. The rather slow decline in recorded child poverty is due, in large part, to the fact that the government is targeting relative, rather than absolute, poverty. Income growth has been particularly strong across society since 1998-99, and this means that the poverty line has risen significantly over this time. Although the government is continuing to increase the living standards of low-income households with children, the gap with the rest of society is not closing as fast as the government would like. Rectifying this may require additional resources to be directed to families with children in the forthcoming Budget, on top of measures already announced

Evaluating the labour market impact of Working Families' Tax Credit using difference-in-differences

A difference-in-differences methodology cannot identify the labour market impact of WFTC alone because other taxes and benefits changed at the same time as its introduction. However, a comparison of the change in employment rates for parents against adults without children should underestimate any positive labour supply impact of WFTC for lone parents. Using two different household surveys, we find WFTC and associated reforms increased lone parents' employment by around 3.6 percentage points (ppt). For couples with children, we find that WFTC and associated reforms had no significant effect on mothers' employment, and was associated with a -0.5ppt change in fathers' employment, with the reforms encouraging households to have one earner rather than two. Overall, these changes correspond to between 25,000 and 59,000 extra workers depending upon the data source used. Robustness analysis of our identifying assumptions is generally favourable to our conclusions for lone parents

The impact of tax and benefit changes between April 2000 and April 2003 on parents' labour supply

This Briefing Note provides the first published estimates of the labour market impact of the new tax credits, and the tax and benefit reforms that preceded them, on families with children. Specifically, this note examines all personal tax and benefit reforms introduced between April 2000 and April 2003. We use a structural model of labour supply to examine how these changes affect both the participation rate (the proportion of parents who would like to work at a given hourly wage) and the average weekly hours of work. We examine how the impact varies between lone mothers and adults in couples with children, and how it varies with both the number of children and the age of the youngest child in the family

Financial work incentives in Britain: comparisons over time and between family types

This paper reviews various techniques for quantifying financial incentives to work, shows how financial work incentives have changed across the population since 1979, and estimates how much of these changes are due to changes in the tax and benefit system

Integration of geometric modeling and advanced finite element preprocessing

The structure to a geometry based finite element preprocessing system is presented. The key features of the system are the use of geometric operators to support all geometric calculations required for analysis model generation, and the use of a hierarchic boundary based data structure for the major data sets within the system. The approach presented can support the finite element modeling procedures used today as well as the fully automated procedures under development

Did Working Families' Tax Credit work? Analysing the impact of in-work support on labour supply and programme participation

With micro-data from before and after a major reform in 1999 to the structure and form of in-work transfers in the UK, this paper uses a structural model of labour supply and programme participation to show the impact of a reform to in-work support (Working Families' Tax Credit) on both labour supply and programme participation (or take-up). Estimates suggest that the changes in in-work incomes through the introduction of WFTC increased labour supply of lone mothers by around 4.6 percentage points, slightly reduced labour supply of mothers in couples by 0.2 percentage points, and increased the labour supply of fathers in couples by 0.8 percentage points, equivalent to a net increase in participation of 94,000 workers. Participating in Family Credit, the UK's in-work programme before October 1999, conferred a utility loss as well as a utility gain from the extra income, but we find this utility cost of participation to be lower under WFTC

Poverty and inequality in Britain: 2005

This Commentary provides an update on trends in poverty and inequality in Great Britain, based on the latest official government statistics. It uses the same approach to measuring incomes and poverty in Great Britain as the government employs in its Households Below Average Income (HBAI) publication