Making work pay, making tax credits work: An assessment with specific reference to lone-parent employment

Abstract   This article examines the origins, aims, and design of tax credits in the United Kingdom, and discusses the extent to which tax credits represent a new approach in social security policy. It then focuses on the role that these transfers play in supporting lone mothers in employment, drawing on the experiences of lone-parent families to explore how tax credits worked for them. The discussion highlights the tensions between family and employment change and tax credits rules about reporting changes in circumstances and income.     

Shifting taxes away from labour enhances equity and fiscal efficiency

This paper analyzes the effects of a hypothetical tax reform in Italy, which makes current tax credits more generous and refundable, shifting the tax burden from labour to property. Our methodology contains novel features of great relevance for policy analysis: first, a structural model of labour supply of both employees and self-employed; second, a labour market equilibrium model that encompasses demand side constraints; last, detailed tax system simulation under fiscal neutrality. The empirical findings provide guidance for policy makers’ actions to enhance equity and efficiency of tax system and confirm the relevance of the methodological approach.     

The Brazilian pension model: The pending agenda

To achieve national goals defined by the 1988 Brazilian Federal Constitution, cash benefits alone are insufficient in the absence of more robust social services to reduce inequalities and improve social cohesion. The Constitution, albeit of national importance and international significance, has not addressed many institutional and administrative weaknesses in the design of the national pension system. Although coverage has been increased and inequality reduced, these measures are not sufficient. Brazil's ambitions to further develop social policies (and, indeed, to live up to its accorded international status as a social policy leader) may be constrained by an over‐reliance on conditional cash transfers such as those provided under the Bolsa Família programme. Brazil faces a major political‐economy challenge in addressing all these issues because the policy reform process is difficult, and, more importantly, because of the embedded role of vested interests. Moreover, Brazil must tackle these issues in the face of growing fiscal pressures, which could weaken the current political legitimacy of social policy and undermine important recent successes.     

Pension policy design changes in EU countries since the mid‐1990s

Recent decades have been characterised by significant pension reforms. This article reviews this process, focusing on five policy design issues that have concerned policymakers: optimising poverty alleviation effectiveness; redefining the state's role in smoothing incomes over the life‐course; balancing contributions to benefits; adjusting the system to respond to demographic, economic and social changes; and ensuring that reforms will be long‐lasting. While the role of state pensions is diminishing, there is a growing realisation of the need to ensure that they remain adequate, reigniting interest in minimum pensions and contribution credits. The expanding role of private pensions has led governments to intervene more in their operation. Policymakers have shown interest in automatic adjustment mechanisms to bring about required economic changes. However, there is greater understanding that for these to happen, the state has to engage more with its citizens.     

AUSTRALIAN WELFARE REFORM: FROM CITIZENSHIP TO SOCIAL ENGINEERING

This paper examines the changes in the terms of citizen‐state relations that are coded in Australia's current program of welfare reform. It argues that welfare reform entails a shift from welfare as a limited social right of citizenship to welfare as a form of support conditional upon completing specified obligations, and from the provision of support as a cash payment to support coupling cash with personal services. Together, these shifts have the scope transform the relation between citizen and state fundamentally. This is no less than a shift from social policy citizenship in which claimants are presumed to act on their own behalf to paternalistic support and care directed to reforming character and values as well as to meeting need. The paper argues that this shift violates the fundamental equality essential to social policy citizenship.     

Australia saved from the financial crisis by policy or by exports?

There is general agreement that Australia weathered the Global Financial Crisis (GFC) better than many other advanced countries. There is less agreement as to why. In popular discussion, fiscal policy and continued strong export demand have been championed, with less support for monetary policy. But there is little formal empirical work which disentangles the relative contributions of these three factors. It is the purpose of this paper to make a start in this direction. It does so within the framework of a small vector-autoregressive model. The main finding is that the three factors together actually exacerbated the effects of the GFC on average over the 2009–2011 period, with most of the blame falling on fiscal policy. This seemingly anomalous finding is further explored and explained by households’ response to cash hand-outs which were saved and not spent; indeed, it is conjectured that they took cash hand-outs and government predictions of doom as indicators that bad times were ahead and saved rather than spent in response.     

Cash‐for‐care policy in Sweden: An appraisal of its consequences on female employment

In 2008, Sweden introduced a cash‐for‐care benefit consisting of a flat‐rate sum paid by municipalities to parents whose children were between the ages of one and three and who did not use publicly subsidised childcare. The main object of the reform was to increase parents’ ‘freedom to choose’, but the policy was criticised because of its potentially negative effects on gender equality and mothers’ employment. This study focuses on the effects of cash‐for‐care on female employment in Sweden. The study shows that the adoption of this policy had negative effects on female employment, although primarily in rural areas. Cash‐for‐care was abolished in Sweden in 2016. To evaluate the effects that the policy had on female employment during the time it was in place is important as it indicates what may happen if the policy is introduced again.     

Financial inclusion in India: An axiomatic approach

In this paper we first develop an axiomatic measure of financial inclusion. This measure is readily implementable and useful to determine policy priorities to promote financial inclusion. Next, we demonstrate that supply side data on banking services can be usefully employed to measure financial inclusion. Third, we examine the effects of major banking policies on financial inclusion across states in India during 1972–2009, using panel data econometrics techniques. We find that the social-banking policy has played crucial role to foster financial inclusion across states in India during 1977–1990. Thereafter, the move toward pro-market financial sector reform has adversely affected the pace of financial inclusion. This paper identifies geographic penetration of banks and credit availability as two policy targets to foster financial inclusion in India.     

Is cash allowance a way to ease child care burden? Views of carers in Hong Kong

Caring for the carers is not only a policy challenge for the government but also a global concern to achieve gender equality by restructuring welfare for care. Paying informal carers is one of the measures that address their needs, which is being practiced in Western countries for more than 10 years now. Financial support for care does not only value the contribution of carers but also compensate for the loss of carers caused by unpaid care duties. However, cash for care is a complex issue because it is located within a number of different policy domains that may be considered controversial. This study discusses the views of carers on cash allowance and identifies issues affecting the support provided to the informal care system in Hong Kong. The discussion is based on the findings from the focus group interviews with 11 groups of carers with different socioeconomic backgrounds.     

Cashless stores and cash users

The emergence of cashless stores has led several cities and states to ban such stores. This article investigates this policy issue by characterizing consumers who pay cash for in-person purchases and banked and unbanked consumers who do not have credit or debit cards. Using a random utility model, I simulate the effects on consumer welfare caused by a hypothetical complete transition to cashless stores. The simulations show that the burden from this transition on consumers with no credit or debit cards is seven times higher than the burden on consumers who have both cards. The conclusion lists policy options for alternatives to cash that may be needed before all brick-and-mortar stores become cashless.     

Disquieting Quiet in Hungarian Social Policy

The paper briefly reviews the social policy of the first three freely elected Hungarian governments. The first two had no clear ideological profile, while the third one is neoconservative. The new social policy seeks to strengthen the nation, the family and the "middle classes". Social spending is shrinking but skewed towards the better-off, for instance by non-refundable tax credits. The access to benefits of the poor and the unemployed has been made harsher. These developments have been accepted up to now with quiescence. The poor have no voice, and the not-so-poor have no solidarity for fear of losing their advantages. This policy promotes social exclusion.     

In support of mothers’ employment: limits to policy convergence in the EU?

This article compares 11 Western European countries with respect to public policies that promote the employment of mothers: maternity and parental leave, childcare provisions and family-related tax credits and allowances. The goal of this analysis is to characterise trends in the development of these policies from the mid-1980s to the present and identify the degree of policy convergence in this area of social policy. The process of convergence is analysed along two sets of criteria: the amount and forms of provisions, and the coherence of policies (eligibility, funding mechanisms, locus of regulation and quality control). The analysis is informed by theories of welfare regimes that identify distinctive patterns in which national policies shape the employment of women: general family support, dual-earner families and market-oriented families. Findings of the study reveal limited development towards harmonisation of national social policies. Such resilience of national welfare regimes can be attributed to institutional path dependence, on the one hand, and to minimal EU efforts to harmonise social policies, on the other. The article suggests that integrating markets have so far had a limited effect on social policy development, but that there are positive signs that convergence is possible in the future.     

Were We Really All in it Together? The Distributional Effects of the 2010–15 UK Coalition Government's Tax‐benefit Policy Changes

This article examines the distributional impacts of changes to benefits, tax credits, pensions and direct taxes between the UK general elections of May 2010 and May 2015. The changes did not have a common effect on all household incomes; nor did the direct tax‐benefit changes contribute to deficit reduction. Effectively, reductions in benefits and tax credits financed part of the direct taxes cuts, but the overall net fiscal cost increased pressure for cuts in other public services and increases in other (more regressive) taxes. The main gains were in the upper middle of the income distribution, and the main losers were at the bottom and those close to, but not at, the very top. Across most of the distribution the changes were regressive. By comparing with other analyses of policy changes in the same period, we illustrate the importance of analytical choices and assumptions for detailed conclusions on their distributional effects. We also show how some groups were clear losers or gained little on average – including lone parent families, large families and families with younger children. Others were gainers, including two‐earner couples, and those in their fifties and early sixties. The findings show that a dominant feature of the period was that the combination of higher tax‐free income tax allowances, financed by cuts in benefits and tax credits, was generally regressive. As this combination also lies at the heart of the proposed policies of the Conservative government since 2015, we would expect these effects to be intensified in the coming years.     

Economic policy implications of the Gibson Law in the Netherlands (1800–2012)

Gibson paradox is one of the most discussed economic phenomena in the literature. As observed by Keynes (1930), the most established empirical fact in economics remains unsolved. This paper investigates the Gibson law in the Netherlands over 1800–2012 focusing on the nature of the paradox. Establishing the presence of the paradox outside Gibson (1923) original research in the United Kingdom brings new light to understanding the paradox true nature. A non-linear analysis (logit) is used to identify the factors behind the paradox in the Netherlands. The results provide support that Gibson paradox is the most established empirical fact (non-linear and multivariate) in economics that has pronounced economic policy implications. Policy makers and central banks significantly affect short-term interest rates influencing long-term rates under the expected rise in interest rates for circulation credits. High purchasing power means better micro and macro liquidity and less demand for circulations credits directing Gibson regime-switching behaviour.     

Economic empowerment or cash‐dependency for orphans and vulnerable children in Kenya: Evidence from an alternative to cash‐only models

Orphan and vulnerable children (OVC) often have worse educational, developmental, nutritional, and behavioral outcomes than non‐OVC. Much of these disparities come from reduced household earnings due to the loss of parental income. The present study used conditional process analysis to evaluate income and savings among OVC households, using cross‐sectional data from 1,060 OVC in a 3‐year Kenyan empowerment program that combined elements of cash transfer, psychosocial support, and small business entrepreneurship. Higher monthly earnings were significantly associated with program participation in a graded fashion. Approximately one‐third of the association was mediated by material inputs, indicating that a substantial portion may be explained by other unobserved program elements. Eighty‐five percent of increased rates of saving money in the past year were mediated by improved monthly income, cash transferred and improved food consumption. Data analysis highlights the need for multisectoral approaches and the need for more research to understand how to improve household economic stability among OVC. Key Practitioner Message: ? Orphans and vulnerable children (OVC) are at risk of greater poverty, leading to multiple developmental and health challenges; ? Current policy in Kenya to offset costs of caring for OVC utilizes monthly cash transfers to households providing care for OVC; ? The present study found that increases in monthly income in an OVC multisectoral empowerment program were largely due to factors beyond the material inputs.     

Efficiency of financial market intermediation in Kenya: A comparative analysis

Wide interest margins as witnessed in Kenya are a sign of a repressed and inefficient financial sector. This paper carries out a cross-country analysis of the determinants of financial market efficiency using panel cointegration with a view to recommending policy options for improving the efficiency of the financial sector intermediation process in Kenya. The study finds that the major contributors to the differences in financial sector inefficiency in Kenya compared to the other countries in the study are high bank operating costs, default risk and financial market structure. The study recommends, among other measures, that the government through the Central Bank need to collaborate with the commercial banks and establish a working credit reference bureau to enable easy identification of credit worthy customers in order to reduce default risk; there is also need by the central bank to license more new banks to increase competition and reduce bank concentration. The study also recommends increased use of technology including phone-banking and e-banking to reduce operation costs of the banks. The paper concludes that contrary to the findings from other cross-country analysis, the factors that lead to financial market in/efficiency varies from one country to the other.     

Mothers at the Service of the New Poverty Agenda: Progresa/Oportunidades, Mexico's Conditional Transfer Programme

This article considers some of the changes and continuities in social protection in Latin America through a focus on the ways in which motherhood is positioned as key to the success of the new anti‐poverty programmes that have followed structural reform. It examines a flagship cash transfer programme known as Progresa/Oportunidades (Opportunities) established in Mexico in 1997 and now being widely adopted in the region. Characterized by some commentators as a quintessentially neo‐liberal programme, it is argued that Oportunidades represents a novel combination of earlier maternalist social policy approaches with the conditional, co‐responsibility models associated with the recent approaches to social welfare and poverty relief endorsed by international policy actors. In the first section, the gendered assumptions that have governed Latin American social policy are described; the second outlines social policy provision in Latin America and identifies the key elements of the new approaches to poverty; and the third critically examines the broader implications of the Mexican programme's selective and gendered construction of social need premised, as it is, on re‐traditionalizing gendered roles and responsibilities.     

How Teen Mothers Are Faring Under Welfare Reform

We examine socioeconomic and psychological well-being among 88 low-income minor mothers. Half of the young mothers receive cash welfare assistance and face new policy mandates regarding coresidence status and school attendance. Although most appear to be "complying" with the requirements of the new welfare rules and are satisfied with their current living arrangements, many are faring poorly on dimensions of psychological well-being and life stress. Receipt of cash welfare is not a significant correlate of school success, parenting stress, or economic strain. Teen coresidence with their mothers does not appear to buffer against the experience of child care problems, depressive symptoms, or domestic violence. We discuss the implications of the results forresearch, policy, and services for teen parent families.     

Does gold act as a safe haven against exchange rate fluctuations? The case of Pakistan rupee

Investors often look for a refuge to avoid undesirable exposures to risk during period of extreme downturns in currency returns. We investigate daily gold and rupee exchange rates depreciation against set of currencies over the period of 1992–2015. Using wavelets at multiple time horizons; we find that gold act as a consistent short run hedge against exchange rate hence validating the exchange rate destruction hypothesis. This finding is helpful for speculators in their decision making while taking long and short positions accordingly. This finding suggests that central bank also need to keep other safe haven assets in reserves because the hedging ability of gold is only limited to short run. Further, the role of gold in providing protection against currency risks is also confirmed using quantile regression. These results assist portfolio managers and governments in formulating effectual diversification strategy for preserving investment portfolio during extreme event condition. Our results also suggest that gold has a lead relationship with exchange rate; however, this relationship switches over specific time intervals. This finding is of major concern for policy makers in determining the extent of stabilization in gold prices to bring consistency to exchange rate. Finally, the Granger coherence coefficients confirm that the strength of the causal relationship varies across over all frequencies. These conclusions have important implications for policy makers, economic analysts, portfolio managers and institutional investors.