Has In-Work Benefit Reform Helped the Labour Market?
Hoynes, Hilary. “Has In-Work Benefit Reform Helped the Labour Market?” in Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, edited by David Card, Richard Blundell and Richard Freeman. University of Chicago Press: Chicago, 2004 (with Richard Blundell).
The aim of this paper is to examine the labour market impact of in-work benefit reform in the UK. Evidence is drawn from the impact of earlier reforms in the UK and similar reforms in the US. We focus on the impact on labour supply – employment and hours of work. In the US a large proportion of the dramatic increase in participation among low educated single parents in the 1990s has been attributed to the increased generosity of the EITC. The impact of apparently similar reforms in the UK appears to have been smaller. We argue that these differences can be attributed to four factors: the impact of interactions with other means tested benefits in the UK; the importance of workless couples with children in the UK, who make up nearly 50% of the recipients in the UK; the level of income support given to non-working parents in the UK; and the strength of the economic upturn in the US during the mid 1990s.
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