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14 Mikroekonomia

BANK I KREDYT styczeń 2008

eligibility to tlie HB does uot eud eveu iu the situation włien both partners work full-time.

5.1.3. Means-tested benelits and IHedńie Marginal Tai Ratę i

The budget constraints presented in tliis paper also allow to ideutify elenieuts of the tax and beuefit systems which may need particular attention of policy makers with respect to the labour market inceutives the systems provide. This refers particularly to the features of the systems which lead to effective marginal tax rates (EMTRs) iu excess of 100%. In the figlires these cau be identified as points on the budget lines where tlie level of the disposable income falls despite the fact that work iutensity (and thus gross earnings) increase.

Gettiug rid of EMRTs in excess of 100% was one of the aims of the tax and benefit reforms iu the IJK mtroduced sińce the early 1990s, and all receut chauges to taxes and beuefits have beeu conducted in snch a way so as to avoid these effects. As we ean see on pauels A and B of Figures 1 to 13, increases iu gross earnings never lead to reductions in disposable incomes. There are parts of the budget lines which are “fiat” implying EMTRs of 100%, but there are uo points on the budget lines suggestiug rates in excess of these. This is not the case when we look at the budget lines generated by the German and the Polish system.

EMTRs in excess of 100% - Germany

The German system introduces EMTRs iu excess of 100% as a result of the so called Mini-jobs. As outlined iu Section 2.2, employees pay uo Social Security Gontribntious on earnings of less tlian 400 euros per month. However, ouce the level of earnings exceeds this limit, SSCs have to be paid not only on the earnings over and above the 400 euros, but also on the illitial 400. This implies that exceeding this level of gross earnings results in a rednctiou of disposable income. As we cau see on Figures 10-13 the combiuatiou of the tax and the SSCs systems implies that tlns applies especially to the work of second earuers in couples. Depending on the level of earnings of tlie woman tlie 400 euros threshold is reached at differeut levels of work iutensity, but the uegative work iiiceutives ram be seen in tlie case of budget lines drawn for all second earuers. EMTRs in Germany result also front tlie combiuatiou of tax and SSC payments willi the withdrawal of the Ghild Supplemeut - tliis can be seen in Figures 7, 8, and 9 on panels C and D.

EMTRs in excess of 100% - Poland

In Poland the EMTRs exceeding 100% are related to two elenieuts of the beuefit system, namely the Ilousing Beuefits and the Family Beuefits. Iu the case of the Ilousing Benefits while the level of the payments is gradually withdrawn as net incomes rise, the benefit is withdrawn entirely at the point when the income considered for the means-test exceeds a certaiu threshold value. The effect of sucli withdrawal can be seen m Figures 1, 2, 3, 4 and 6 on panels F for the case of the disposable income computed at 50**' percentile wagę.

The same effects are also preseut iu Figurę 10 at all three wagę levels of the second partner. The effects of withdrawing the Single-Pareut Supplemeut of Family Benefits can be seen in Figurę 2 (panels E and F). Iu Figurę 2E we can see that the family exceeds the threshold for the higher level of the supplemeut when the woman begins to work morę tkań 14 hours per week. This effect happeus at lower work iutensity for the 50“ percentile wagę and at higher work iutensity for the 10¹*' percentile wagę (Figurę 2F), but in all cases working an extra hour leads to a lower level of the benefit. On tlie figures we cau also ideutify three profiles of families for which at a certaiu level of earnings the Family Benefits are fully withdrawn. Iluś cau be seen iu Figures 2 and 3 (panels F) for the case of the disposable income with 50*’¹ percentile wagę. For this level of the wagę Family Benefits are withdrawn at work iutensity of about 35 hours per week. The result of this is a rednctiou iu disposable income in response to higher level of earnings. Since the eligibility threshold for the FB is computed per capita (iucludiug the adults in the family), couples with childreu are eligible for the benefits even at relatively high level of earnings. Of all the budget constraints drafted for couples the withdrawal of Family Benefits cau be noticed only iu the case of the family profile 13, where both partners work at 50¹" percentile wagę and the mau works fnll-tuue (Figurę 13F). At the point when the woman’s work iutensity increases to about 35 hours per week, the family is no longer eligible to receive the Family Beuefits. The uegative effects on work inceutives which are the conseipience of the existence of very high EMTRs will also be reflected iu the replacemeut ratios, the analysis of which is presented below iu Section 6.

5.1.4. Work intensity and income gains

The budget lines presented in panels B, D and F also provide a good iutuitive refleetiou of how strong are the labour market iucentives generated by the respective tax and benefit Systems. This is given by the slope of the budget lines at various levels of work intensity, which sliows how fast disposable incomes grow in response to increases iu hours of work and thus gross earnings.

The assumptious madę for Poland coucerniug the payments of Temporary Social Assistauce imply Iow levels of support through the TSA but also relatively Iow withdrawal rates of the beuefit and this in tum meaus that disposable incomes geuerally grow as earnings rise even at the lowest levels of earnings. In Germany and iu the UK, on the other hand withdrawal rates of social assistauce beuefits (AI.GII and Income Support) at Iow levels of earnings imply very Iow increases in disposable