Hostname: page-component-848d4c4894-nmvwc Total loading time: 0 Render date: 2024-06-15T17:42:42.416Z Has data issue: false hasContentIssue false
  • English
  • Français

Options for Assisting Low Wage Earners

Published online by Cambridge University Press:  01 January 2023

David Ingles  and
Ken Oliver
Ken Oliver
Affiliation:
Commonwealth Department of Family and Community Services, Canberra
Get access Rights & Permissions [Opens in a new window]

Abstract

A number of proposals for reducing unemployment in Australia focus on cuts or freezes in award wages. Typically, such proposals include (often vague) proposals to offset some of the distributional consequences by top-ups or other adjustments to the tax/transfer system. This paper examines the available options and concludes that, given the current structure of the social security system, there are serious obstacles to the most common ones such as the NIT or the EITC. There is a case for further reducing tax burdens on low wage earners, but options in this area tend to be very expensive and/or require targeting on a family needs basis

Type
Research Article
Information
The Economic and Labour Relations Review , Volume 11 , Issue 1 , June 2000 , pp. 76 - 107
Copyright
Copyright © The Author(s) 2000

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

A number of people have provided helpful comments on previous versions of this paper. Among these, the authors would like to particularly thank Wayne Jackson, James Jordan and David Kalisch (from FaCS) and Scott Matheson (DEWRSB). Our thanks are also due to Peter Whiteford for data on minimum wages. The views expressed in this paper, along with any errors, are those of the authors. They do not represent the views of either the Government or the Department of Family and Community Services.

References

Atkinson, A, Micklewright, J (1991) Unemployment Compensation and Labor Market Transitions: A Critical Review. Journal-of-Economic-Literature, 29(4), December pp. 1679–1727 Google Scholar
Baldassarrl, M, Paganetto, M, Phelps, E (eds) Equity, efficiency and growth: The future of the welfare state, Central Issues in Contemporary Economic Theory and Policy Series, St Martins Press, New York Google Scholar
Blanchard, O (1999) ‘European unemployment: the role of shocks and institutions’ published at http://web.mit.edu/blanchar/www/baffi3.pdf Google Scholar
Boston, J, St John, S (1999) ‘Targeting versus universality: social assistance for all’, Ch 6 in Boston, , et al (eds)Google Scholar
Boston, J., Dalziel, P., St John, S. (eds) (1999) Redesigning the welfare state in new Zealand: problems, policies, prospects, Oxford University Press Google Scholar
Bradbury, B (1998) Optimal tax theory and the structure of effective marginal tax rates: a survey SPRC, forthcomingGoogle Scholar
Browning, E (1973) ‘Alternative programs for income redistribution: the NIT and the NWT’, American Economic Review, 63: 1, March, 38–49 Google Scholar
Browning, E (1995) ‘Effects of the earned income tax credit on income and welfare’, National Tax Journal, 48:1, March, 23–43 Google Scholar
Calmfors, L, Driffill, J (1988) ‘Centralization of Wage Bargaining’, Economic Policy No.6, April, 14–61 Google Scholar
Costello, P (1998) (Treasurer) Tax reform-not a new tax; a new tax system, AGPS, Canberra Google Scholar
Dawkins, P (1999) ‘A Plan to Cut Unemployment in Australia - an Elaboration of the ‘Five Economists’ Letter to the Prime Minister’ (Chapter 6 of Mercer-Melboume Institute Quarterly Bulletin of Economic Trends, 1. 99)Google Scholar
Dawkins, (1998) ‘Solutions to unemployment and avoiding the “diabolical trade-off”: a discussion’ in Debelle, , Borland, (eds), 309–328 Google Scholar
Dawkins, P, Beer, G, Harding, A, Johnson, D, Scutella, R (1998a) ‘Towards a negative income tax system for Australia’, Australian Economic Review, 31:3 pp. 237–257 Google Scholar
Dawkins, P, Freebairn, J, Garnaut, R, Keating, M, Richardson, C (1998b) ‘Open letter to the Prime Minister’ The Australian, 26.10.98 p. 13 Google Scholar
Debelle, G, Borland, J (1998) Unemployment and the Australian labour market: Proceedings of a Conference, Reserve Bank of Australia and Centre for Economic Policy Research, ANU Google Scholar
Debelle, G, Vickery, J (1998) ‘The macroeconomics of Australian unemployment’, in Debelle, , Borland, EdsGoogle Scholar
Dickert, S, Houser, S, Scholz, J (1995) The Earned Income Tax Credit and Transfer Programs: A Study of Labour Market and Program Participation’, in Poterba, J (ed), Paper presented to OECD Meeting of Experts in Microsimulation. Paris, JanuaryGoogle Scholar
Dixon, D, Foster, C (1983) ‘An alternative path to integration of social security and personal income tax arrangements’ Occasional Paper No 1, Australian Tax Research Foundation, SydneyGoogle Scholar
Dusseldorp Skills Forum (1999) Australia’s Young Adults: the Deepening Divide at www.dsf.org.au/features/ol/yr99/default.htm Google Scholar
Eardley, T (1998) ‘Working but poor: low pay and poverty in Australia’ SPRC Research Report, University of NSWGoogle Scholar
Eissa, N, Liebman, J (1996) ‘Labor supply response to the earned income tax credit’ Quarterly Journal of Economics May, pp. 605–637 CrossRefGoogle Scholar
Eissa, N, Hoynes, H (1998) ‘The earned income tax credit and the labour supply of married couples’, NBER Working Paper No W6856, DecemberGoogle Scholar
Ellwood, D (1998) ‘The impact of the EITC and other social policy changes on work and marriage in the United States’ Paper for DSS/CEPR conference on income support, labour markets and behaviour, ANU, November 1998Google Scholar
Freeman, R (1996) ‘The minimum wage as a redistributive tool’ Economic Journal 106, May, pp. 639–649 Google Scholar
Friedman, M (1962) Capitalism and Freedom, Chicago: University of Chicago Press Google Scholar
Garnaut, R (1999) ‘Full Employment in a New Country’, speech to the Australia Unlimited Conference, published at www.theaustralian.com.au/extras/001/txt4318631.htm Google Scholar
Gregory, M (1998) ‘Reforming the labour market: an assessment of the UK policies of the Thatcher era’ Australian Economic Review, 31:4 pp. 329–44CrossRefGoogle Scholar
Gregory, R (1993) ‘Aspects of Australian and US living standards: the disappointing decades 1970–1990’, Economic Record, 69:204, March pp. 61–76 Google Scholar
Gregory, R (1998) ‘What do we mean by an unemployment solution’ in Debelle, , Borland, (eds), 329–340 Google Scholar
Harding, A (1994) ‘Income inequality in Australia from 1982 to 1993’ Natsem Discussion Paper No 4Google Scholar
Harding, A (1997a) Tighter targeting revisited: growing problems within the tax- transfer system’, Paper delivered at Issues in public sector change seminars, University of Melbourne SeptemberGoogle Scholar
Harding, A (1997b) ‘The suffering middle: trends in income inequality in Australia 1982 to 1993/93’ Australian Economic Review 30:4, pp. 341–358 Google Scholar
Harding, A, Richardson, S (1998) ‘Unemployment and income distribution’, in Debelle, , Borland, (eds)Google Scholar
Harding, A, Szukalska, A (1999) Trends in child poverty 1982 to 1995–96 Paper presented at the Australian Association for Social Research Annual Conference, 12 FebruaryGoogle Scholar
Haveman, R (1996) ‘Reducing Poverty While Increasing Employment: A Primer on Alternative Strategies, and a Blueprint’ OECD-Economic-Studies, 0(26) pp. 7–42 Google Scholar
Heckman, J (1993) ‘What has been learned about labor supply in the past twenty years?’ AEA Papers and Proceedings May, 83:2 pp. 116–121 Google Scholar
Holtzblatt, J, McCubbin, J, Gillette, R (1994) ‘Promoting work through the EITC’ National Tax Journal September, pp. 591–607 Google Scholar
Ingles, D (1997) ‘Low income traps for working families’ ANU Centre for Economic Policy Research Discussion Paper No 363, AprilGoogle Scholar
Ingles, D (1998a) ‘Overcoming anomalies in the interaction of tax and social security’, Australian Economic Review 31:3 pp. 271–80Google Scholar
Ingles, D (1998b) ‘Universal and selective benefits revisited’, Social Security Journal FaCS 1998/2Google Scholar
Ingles, D (1999) ‘Earned income tax credits: do they have any role to play in Australia?’, FaCS, mimeoGoogle Scholar
Johnson, D, Manning, I, Hellwig, O (1995) ‘Trends in the distribution of cash income and non-cash benefits’ Report to the Department of the Prime Minister and Cabinet, AGPS, Canberra Google Scholar
Joint Governments (1999) ‘Safety net review - wages 1998–1999’ Submission to the AIRC, February, mimeoGoogle Scholar
Kalb, G (1998) Do welfare benefits influence labour market behaviour? An international literature review SPRC, Uni NSW, NovemberGoogle Scholar
Kalisch, D, Aman, T, Buchele, L (1998) ‘Social and health policies in OECD countries: a survey of current programmes and recent developments’ OECD Labour market and social policy - Occasional Paper No 33. DEELSA/ ELSAAA/D(98)4.Google Scholar
Keating, M, Lambert, S (1998) ‘From welfare to work: improving the interface of tax and social security’ NATSEM Discussion paper No 35, OctoberGoogle Scholar
Layard, R (1996) ‘Subsidising Employment Rather than Unemployment’ in Baldas- sarri et al. 56–71 Google Scholar
Keen, M (1997) ‘Peculiar institutions: a British perspective on tax policy in the United States’ Fiscal Studies, 18:4 pp. 371–400 CrossRefGoogle Scholar
Lin, W, Robins, P, Card, D, Harknett, K, Lui-Gurr, S (1998) When financial incentives encourage work, Social Research and Demonstration Corporation, Canada Google Scholar
Machin, S, Manning, A (1996) ‘Employment and the introduction of a minimum wage in Britain’ Economic Journal, 106:436, pp. 667–76CrossRefGoogle Scholar
Mendelson, M (1998) ‘Why special tax credits for low-income working families are being abandoned in Canada’ http://www.jrf.org.uk/social_policy/SPR148.html Google Scholar
Mirrlees, J (1971) ‘An exploration of the theory of optimal income taxation’ Review of Economic Studies 38, pp. 175–208 CrossRefGoogle Scholar
Mitchell, W, Freebairn, J (1997) ‘Towards full employment’ Australian Economic Review 30:4 pp. 405–17Google Scholar
Mitchell, W, Watts, M (1997) ‘The path to full employment’ Australian Economic Review 30:4 pp. 436–44Google Scholar
OECD (1994) Jobs Study: Evidence and explanations, Parts I and II, OECD ParisGoogle Scholar
OECD (1996) Employment Outlook OECD ParisGoogle Scholar
OECD (1997) The OECD Job Strategy. Making Work Pay: Taxation, Benefits, Employment and Unemployment, OECD, ParisGoogle Scholar
OECD (1998) Employment Outlook, OECD, Paris Google Scholar
OECD (1999) 4 caring world: the new social policy agenda, OECD, Paris Google Scholar
Perry, J (1995) ‘Twenty Payments or One? Alternative Structures for the Australian Social Security System’, Paper presented at the Australian Social Policy Research Conference, Sydney, July 1995Google Scholar
Phelps, E (1997) Rewarding Work: how to restore participation and self-support to free enterprise Harvard University Press, Cambridge and London Google Scholar
Poterba, J (1998) Tax policy and the economy. Volume 12; MIT Press for the National Bureau of Economic Research, Cambridge Google Scholar
Redmond, G ‘Unemployment trends and incentives among large families in Australia, 1980–1997’ SPRC Research Report, University of NSWGoogle Scholar
Rhys-Williams, J (1943) Something to Look Forward To. London: MacDonald Google Scholar
Richardson, S (1998) ‘Households, individuals and low wages’ Paper for Conference on Income Support, Labour Markets and Behaviour: A Research Agenda, FaCS and CEPR, ANUGoogle Scholar
Richardson, S, Harding, A (1998a) ‘Poor workers? The link between low wages, low family income and transfer systems’, Paper for Conference ‘Fairly efficient? Equity and productivity in the Australian labour market, ANU CEPR and Reshaping Australian Institutions Project, June 16–17Google Scholar
Richardson, S, Harding, A (1998b) ‘Low wages and the distribution of family income in Australia’, Paper for the 25th General Conference of the International Association for the Research in Income and Wealth, Cambridge, England, AugustGoogle Scholar
Scarpetta, S (1996) ‘Assessing the Role of Labour Market Policies and Institutional Settings on Unemployment: a Cross-Country Study’ in OECD Economic Studies] 0(26) pp. 43–98 Google Scholar
Scholz, J (1994) ‘The earned income tax credit: participation, compliance and anti-poverty effectiveness’ National Tax Journal, 47, pp. 63–87 Google Scholar
Scholz, J (1996) ‘In-work benefits in the United States: the Earned Income Tax Credit’ Economic Journal, 106, Jan. pp. 156–69Google Scholar
Warburton, M, Vuong, L, Evert, H (1999) ‘An evaluation of the Working nation income test changes for unemployed people’, Paper for SPRC Conference, JulyGoogle Scholar
Walker, R, Wiseman, M (1997) ‘The possibility of a British earned income tax credit’ Fiscal Studies, 18:4, pp. 401–425 CrossRefGoogle Scholar
Whiteford, P (1998) ‘The Australian system of social protection: what economists should know’, Paper for Conference on Income support, labour markets and behaviour, FaCS and ANU, NovemberGoogle Scholar
Whitehouse, E (1996) ‘Designing and implementing in-work benefits’ Economic Journal 106, pp. 130–41Google Scholar
Yin, G (1996) ‘Should today’;s fastest growing federal assistance be roped in?’ The American Enterprise July/August, pp. 78–9Google Scholar
Yin, G, Sholtz, J, Forman, J, Mazor, M (1994) ‘Improving the delivery of benefits to the working poor: proposals to reform the earned income tax credit’, American Journal of Tax Policy, 11:2 Google Scholar