Income Support and In-payment Incentives to Work

Income tests limit the costs of providing welfare benefits by targeting payments toword those most in need. By raising effective marginal tax rates, however, income tested benefits can discourage individuals from making private provisions against their own economic hardship. In some cases, the negative incentive effects of income tests can be so great that they overwhelm the intended purpose of targeting, raising the aggregate cost of benefits provision. Identifying the right balance of targeting in the delivery of welfare benefts is therefore crucially important. This study will explore the influence of targeting of welfare benefits on employment responses.

The final report is currently scheduled to be completed in November 2013.

The Melbourne Institute contact for this project is Dr Justin van de Ven.