3784495976

BANK I KREDYT styczeń 2008

Microeconomics

15

incomes or in sonie cases no increases at all (i.e. 100% EMTRs). This is very clearly demonstrated. for exaniple in Fignres 1 and 7.

It is also important to notę tliat in tke UK in tlie cases of several faniilies, earnings grow at lower rates - compared to Germany or Polami — eveu beyoud the points wbere social assistauce and honsiug beuefits have been withdrawn. This resnlt relates to the withdrawal of the WTC. On the one haud, the payments of the WTC eucourage taking up employmeut.¹⁵ On the other hand tliough, becanse of the extension of the earnings rangę over which sonie beuefits are withdrawn, the WTC rednces iucentives to increase work inteusity or in fact to increase productivity at the sanie work inteusity. The effect of the WTC as far as the contribution of earnings to the level of disposable income is concerued can be seen very dearly when conipariug Fignres IB and 2B, which are drafted for the sanie levels of gross earnings. We can see that in the case where the womau receives no WTC (the linę of the disposable iuconie willi 50¹¹' perceutile wagę in Figurę IB) disposable incomes grow faster compared to the ratę of increase of earnings for the womau with the same level of earnings but who is eligible to receive the WTC (Figurę 2B). Interesting differences betweeu the three tax and benefit Systems in terms of tlie ratę of increase in the disposable iuconie in respouse to growing gross earnings can also be seeu for example in Fignres 3, 4, 6 and 8.

S.2. Budget constraints - support forfamiiies with childien

Rir several important reasons tlie flnancial incentives on the labour market for fiunilies willi children deserve sonie special attention. One of tliese is the fact that the trade-off betweeu eflicieucy and ecpiity in tlie case of faniilies with children is especially difficiilt. On the one haud, child poverty is an ini|iortant policy concern and poverty amoug children may have significimt loiig-term social and ecouomic implicatious. Oli tlie other hand, sińce lamilics with children represent a large proportion of tlie popnlatiou, maintauiiiig overall high eniployment leveis wonld be impossible witliout encouraging |xireuts to take up woik,

Pareuts’ eniployment, apart from ecouomic imphcations for the liouseholds, may also have positive effects on child developinent and the child’s ontcomes sucli as school achievements and liealth. However, providiug sufficient resonrces in ont-of-work scenarios, comłnned with higher costs of working for faniilies with children (amoug other thiugs in the form of ckildcare) implies that providing.strongfiuancial inceutives to work is far from straightforward. Tax and benefit treatmeut of faniilies with children is therefore a very important issne on the agenda of most govenuuents.

¹⁵ This is rcflccled in the "kluk," iu the bmlgct lines at 16 and 30 honrs of

The British goverumeut has for a long tune madę reduction of child poverty one of the top priorities. The reduction was to be achieved by iucreasing the generosity of governnieut transfers for faniilies with children and, at the same time, iucreasing the attractiveuess of eniployment to pareuts by making work pay morę. The first tool tlirough which this was supposed to be achieved was the Working Faniilies' Tax Credit (WFTC), iutrodneed iu October 1999 - a reform which iucreased the relative generosity of iu-work transfers. This mechanisin was subsetpiently replaced by the Childreu’s Tax Credit and the Working Tax Credit in Marcli 2003. The first of tliose combined several cliild-related elemeuts of the tax and benefit system, while the other was to preserve the greater filiancial attractiveness of work which was present in the WFTC.¹⁶ While the WFTC reform improved filiancial incentives to work, the overall package of reforms iutrodneed by the British goverunieut sińce 1997 has had mixed effects on the attractiveness of eniployment.¹⁷

The receut reforms and proposals of reforms of the tax and benefit Systems ni Germany and Folaud also signal that the issnes of filiancial attractiveuess of employmeut for pareuts is an important concern. Iu Germany the focns of attention has been the issne of parental leave after childbirth and the problem of appropriate provisiou and affordable cost of childcare.

In Boland on the other hand, the receut discussions focused on the provisiou of tax allowances for faniilies with children tliereby making work pay morę for pareuts. Tliese receut govemmeut proposals as well as the stmeture of the 2005 Systems preseuted in our aualysis show different a|>proaches to supporting faniilies with children, and the different Solutions adopted offer potential eross-conntiy lessous. Below we use tlie examp!e faniilies to discuss the o|ieration of the benefit design with special attention to faniilies with children.

5.2.]. Support tor lone-parent families

Fignres 2-5 show sonie important differences iu the treatmeut of lone pareuts iu the tax and benefit Systems in the three couutries. One of the morę striking points of the aualysis of our examples is the fact that filiancial iuceutives to work are not much stronger for the lone pareuts who receive mamtenauce support from the missiug partuers (compare FP2 and FP3). This is soiuetliing we could expect Since this support couiifs as income for tlie umiputation of means-tested benefits, and so out-of-work income sliould not be much different, while iu-work income sliould be higher for the pareuts receivmg mamtennuce. This, however is counteracted in ¹⁰ lor morę dctails on llic Hiilisli reforms see for cxami>!c Clark el al. (2002): lUmidell (20110), aud llrewcr (2003).