In-Work Benefits: Effective Social Protection or ‘Emperor's New Clothes’?

Abstract

In work benefits (IWBs) were initially introduced in the UK and USA in the 1970s and have expanded greatly in scope and geographical coverage in recent decades.¹ Recent studies by organisations such as the OECD have presented a generally positive picture of IWBs, but a review of the evidence suggests that their achievements are less clear-cut and more contestable than might be expected. The purpose of this article is to examine the role of in-work benefits (IWBs) in four OECD countries (France, New Zealand, UK and the USA) in order to establish the impact these benefits have had on employment and poverty and to assess the extent to which they meet their objectives.

Drawing on a review of the international literature and an in-depth study of the four countries concerned, this article argues that IWBs can play a useful role in increasing the employment rate of specific groups. However, the impact of IWBs is limited and their effect on overall employment is small. The large-scale expansion of IWBs in the UK and USA would appear to be driven by particular policy views in these societies rather than by the policy outcomes achieved by IWBs, and this trend is unlikely to be replicated, especially in continental Europe.