BN_Tackling_the_adequacy_trap[1].pdf (665.75 kB)
Tackling the adequacy trap: earnings, incomes and work incentives under the Universal Credit
report
posted on 2011-02-21, 15:56 authored by Donald Hirsch, Jacqueline BeckhellingUnder existing tax and benefit rules, households on low-to-middle incomes frequently face
high rates of withdrawal of state support as they increase their earnings. The introduction of the Universal Credit does not fundamentally change this situation,
though there will be a complex mix of winners and losers. For households with the lowest earnings, the very highest withdrawal rates (where each
additional £1 of income is reduced by 90p or more) will be abolished. However for others,
withdrawal rates will get steeper (rising from 70 per cent to 76 per cent for existing tax
credit recipients). Under reasonable assumptions about the structure of the future system, full-time workers
on low wages will tend to be better-off under Universal Credit if they are supporting
partners and children , but slightly worse-off if they are single. Lone parents working less
than 16 hours a week will benefit, but those working longer than this will be worse-off.
People who are not working will have increased incentives to do small amounts of work if
they do not have a working partner, but in many cases less incentive if their partner does
work. The precise pattern of winners and losers is highly sensitive to as yet unresolved
details of the Universal Credit, such as how the childcare tax credit will be replaced.
The nature and level of childcare support introduced will affect the ability of many
families with children to earn a reasonable income, and determine whether work
continues to pay.
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School
- Social Sciences
Department
- Communication, Media, Social and Policy Studies
Research Unit
- Centre for Research in Social Policy (CRSP)
Citation
HIRSCH, D. and BECKHELLING, J., 2011. Tackling the adequacy trap: earnings, incomes and work incentives under the Universal Credit. London: Resolution Foundation, pp. 1-9.Publisher
© Resolution FoundationVersion
- VoR (Version of Record)
Publication date
2011Notes
This is a report produced for the Resolution Foundation by the Centre for Research in Social Policy (CRSP) Loughborough University.Publisher version
Language
- en
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