Work Incentives and 'In-Work' Benefit Reforms: A Review

In-work benefit reforms seek to reduce poverty and promote employment among low-income families. Using evidence from similar policies in the USA and Canada, this paper reviews the likely impact of recent UK reforms. The focus is on employment and hours. In particular, the paper examines the effectiveness of the new Working Families Tax Credit in the UK in increasing employment among low-income families. It presents evidence suggesting modest increases in employment for single parents and workerless married couples with children, but with some offsetting reductions in employment in two-earner couples with young children.