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The Tax and Benefit Systems, and Their Effects on People With Low Earnings Potential

In: Improving Incentives for the Low-Paid

Author

Listed:
  • Hermione Parker

Abstract

For the purposes of this chapter the term unemployment trap refers to the situation whereby paid work is not worthwhile by comparison with life on the dole, with the latter defined to encompass all out-of-work benefits, including invalidity benefit and income support for lone parents as well as unemployment benefits. The term poverty trap refers to the situation whereby extra earnings are barely worthwhile, due to loss of means-tested benefits, extra tax liability and (sometimes) extra work expenses. Low earnings means low in relation to benefit entitlement when not in paid work, after deduction of income tax, National Insurance contribution (NIC), local authority rates/community charge, and work expenses.

Suggested Citation

  • Hermione Parker, 1990. "The Tax and Benefit Systems, and Their Effects on People With Low Earnings Potential," Palgrave Macmillan Books, in: Alex Bowen & Ken Mayhew (ed.), Improving Incentives for the Low-Paid, chapter 3, pages 73-119, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-21012-1_3
    DOI: 10.1007/978-1-349-21012-1_3
    as

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