Loughborough University
Browse
BN_Tackling_the_adequacy_trap[1].pdf (665.75 kB)

Tackling the adequacy trap: earnings, incomes and work incentives under the Universal Credit

Download (665.75 kB)
report
posted on 2011-02-21, 15:56 authored by Donald Hirsch, Jacqueline Beckhelling
Under 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.

History

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 Foundation

Version

  • VoR (Version of Record)

Publication date

2011

Notes

This is a report produced for the Resolution Foundation by the Centre for Research in Social Policy (CRSP) Loughborough University.

Language

  • en

Usage metrics

    Loughborough Publications

    Categories

    No categories selected

    Keywords

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC