Active labour market policy vs employment tax credits: lessons from recent UK reforms

Richard Blundell () and Costas Meghir

No 2002:1, Working Paper Series from IFAU - Institute for Evaluation of Labour Market and Education Policy

Abstract: Many welfare-to-work programs in both North America and Europe are directed at making work pay for the low skilled. This paper identifies two alternative policies that are motivated by this same objective – active labour market programs that involve wage subsidies together with improved job matching; and earned income tax credits that supplement wages for working low-income families. Although sharing similar concerns over labour market incentives for low skilled workers, these alternative policies typically differ in many important ways. We present an evaluation of the impacts of two such recent programs designed to enhance the labour market attachment of low-wage workers in the UK. These programs have many features in common and are similar to many policy proposals in Europe and North America. The evaluation of the UK reforms brings empirical evidence into the debate on the effectiveness of these programs and is used to assess what aspects of their design work well and what aspects could be improved.

Keywords: welfare reform; tax credits; wage subsidies; labour supply (search for similar items in EconPapers)
JEL-codes: C25 H31 H53 J21 J22 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2002-01-15
New Economics Papers: this item is included in nep-ltv and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published in Swedish Economic Policy Review, 2001, pages 239-266.

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