Making Work Pay for Whom? Tax and Benefits Impacts on In-Work Poverty

In 1997, the OECD published a report entitled Making work pay (OECD, 1997) which was the first in a series of publications dedicated to a systematic cross-country comparison of financial disincentives to take up paid work (’unemployment trap’) or to increase working hours in order to escape poverty (’poverty trap’). The aim of identifying and removing barriers to employment due to poorly integrated tax and benefit systems and to ‘make work pay’ (MWP) not only guided the OECD publications but also featured prominently in tax and benefit reforms that took place in many OECD countries during the last 15 years. A recent overview of making work pay policies finds that more than half of all OECD countries now operate employment conditional cash payments or ‘in-work benefits’ of some kind (Immervoll and Pearson, 2009).