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Measuring Worker Disincentives: Taxes, Benefits and the Transition into Employment

Author

Listed:
  • Alfred Michael Dockery

    (Curtin University)

  • Rachel Ong

    (Curtin University)

  • Gavin Wood

    (RMIT University)

Abstract

Disincentives to employment participation arising from the tax-benefit system have been a major concern for welfare reform. Data from the Household, Income and Labour Dynamics in Australia Survey are used to generate and test the robustness of three commonly used disincentive measures for non-working Australians: effective marginal tax rates, replacement rates and participation tax rates. The results of transition models suggest financial disincentives as measured in the current period have a large effect on employment outcomes one year later, and the replacement rate is the preferred measure for modelling disincentives facing the unemployed. While attracting most attention in the welfare-to-work debate, effective marginal tax rates are found to be an inappropriate measure of work disincentives facing the non-employed.

Suggested Citation

  • Alfred Michael Dockery & Rachel Ong & Gavin Wood, 2011. "Measuring Worker Disincentives: Taxes, Benefits and the Transition into Employment," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 14(3), pages 265-288.
    • Handle: RePEc:ozl:journl:v:14:y:2011:i:3:p:265-288
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    References listed on IDEAS

    as
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    Cited by:

    1. Meg Smith & Kathy Tannous, 2013. "Access to Full-Time Employment - Does Gender Matter?," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 16(2), pages 237-257.
    2. Rachel Ong & Gavin Wood & Melek Cigdem, 2013. "Work incentives and decisions to remain in paid work in Australia," Bankwest Curtin Economics Centre Working Paper series WP1312, Bankwest Curtin Economics Centre (BCEC), Curtin Business School.

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    More about this item

    Keywords

    Welfare and Poverty; Government Programs; Provision and Effects of Welfare Programs; Unemployment Models; Duration; Incidence and Job Search; Time Allocation; Labour Supply;
    All these keywords.

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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