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REWARDING JOBS: Government Policy and Work Incentives

Christopher Heady OECD, Centre for Tax Policy and Administration Herwig Immervoll OECD, Employment, Labour and Social Affairs. REWARDING JOBS: Government Policy and Work Incentives. Introduction Methodology Illustrations Taxation of low-paid workers Tax treatment of families

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REWARDING JOBS: Government Policy and Work Incentives

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  1. Christopher HeadyOECD, Centre for Tax Policy and Administration Herwig Immervoll OECD, Employment, Labour and Social Affairs REWARDING JOBS:Government Policy and Work Incentives

  2. Introduction Methodology Illustrations Taxation of low-paid workers Tax treatment of families Tax advantages for two-earner couples Net replacement rates Low-wage ‘traps’ and marginal effective tax rates Escaping poverty Conclusions Outline

  3. Benefit dependency Need for incentives & adequate income levels Role of policy indicators Identify sub-groups Measure progress International comparison Taxing Wages Benefits and Wages Introduction

  4. Both are based on ‘typical families’ Internationally comparable policy indicators Focus on policy rules rather than policy outcomes:abstracts from population differences Tax-benefit position in a particular situation Plus: effects of transitions financial incentives Taxing Wages Taxes (including social security contributions) and universal benefits only Incomes from 67% to 167% of APW Benefits and Wages Adds means-tested and unemployment benefits Covers lower income levels Methodology

  5. Monitoring policies:Complementing macro- and outcome-based indicators Source: OECD, various years, Taxing Wages; Implicit Tax Rates based on an updated version of Carey and Rabesona (2002).

  6. Tax treatment of families Source: OECD, 2003, Taxing Wages.

  7. Tax advantages for two-earner couples Source: OECD, 2003, Taxing Wages.

  8. Employment transitions:Net replacement rates Source: OECD, 2004, Benefits and Wages.

  9. Long-term unemployment Source: OECD, 2004, Benefits and Wages.

  10. A more complete picture:How much remains in workers’ pockets? Source: OECD, 2004, Benefits and Wages.

  11. Adding up taxes and transfers:Low-wage ‘traps’ & marginal effective tax rates Source: OECD, 2004, Benefits and Wages.

  12. Income Adequacy Source: OECD, 2004, Benefits and Wages.

  13. OECD’s Taxing Wages & Benefits and Wages provide policy-relevant indicators that are suitable for international comparisons of tax and benefit structures Different indicator(s) appropriate for different policy issues OECD models contain details of policy rules examine different family and labour market situations Flexible framework that can generate additional indicators as the need arises Comparing resulting indicators across countries: ‘league tables’? Conclusions

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