A servant to two masters

Ondertitel:constraints of making work pay on poverty reduction in North-western EU countries

This thesis studies the constraints that ‘making work pay’ (MWP) imposes on poverty reduction in North-western EU countries. These constraints can be reflected both at the policy and socio-economic outcomes level, that is, in the decisions of both policy makers and people. The chapters of this thesis deal with the equity-efficiency tradeoff at both levels. At the policy level, the first chapter uses data on hypothetical households and proposes a complementary hypothesis to explain the erosion of the minimum social floor: because policy makers are generally interested in keeping a hierarchy between the incomes when people are in and out of work, the evolutions of minimum wages can constrain the growth of minimum incomes. This chapter finds a mixed picture with respect to this hypothesis. In the second chapter, considering the potential importance of financial participation incentives for poverty reduction, I and co-authors calculate how much it would cost to close all poverty gaps while maintaining those incentives at the bottom of the income distribution. We find that this would require around two times the budget needed to just lift all disposable household incomes to the poverty thresholds. In the third chapter, I calculate the actual effects of changes in financial work incentives in Belgium. I find that the yearto-year changes in MWP somewhat affected the probability of long-term unemployed people taking up work, while they did not affect the hours worked by part-timers. Lastly, to connect both the anti-poverty and efficiency dimensions of reforms, in the fourth chapter I define a framework to measure the poverty gap change per unit of net revenue that tax-benefit reforms produce. In an empirical application in Belgium, I find that the anti-poverty marginal benefit of reforms is noticeable lower when considering labour supply reactions. All in all, the results of this thesis point towards the importance of keeping a balance between reforms to inand out-of-work transfers to achieve better poverty, employment and public finance outcomes, and that this is not a ‘cheap’ thing to do.

Jaar van publicatie:2020

Trefwoorden:Doctoral thesis

Toegankelijkheid:Open