Benefits and tax credits

In this commentary, we use the example of the German transfer system and its recent changes to assess consequences of benefit design for social inequalities in times of changing labour markets. Based on the rich literature on the so-called ‘Hartz-IV reforms’ in the early 2000s, we argue that while producing winners and losers, the immediate consequences of benefit reforms in Germany for the generosity of transfers were modest. However, the reforms did change some of the basic design principles of the transfer system. While it is still debated to what extent the reforms of the transfer system can explain the combination of decreasing unemployment and increasing labour market inequalities, they certainly modified the institutional context in a way that fundamentally altered the preconditions for the politics of combating inequality. Thus, the German experience offers an interesting example for assessing both intended and unintended consequences of benefit reforms.

The German transfer system for the working-age population: design, changes and consequences

Brülle,

Gangl

2024

Transfers, taxes and tax credits for those on low incomes: beyond Mirrlees

Moffitt

2024

For any given amount of tax revenue obtained from a specific tax, the standard model of economists focuses on the financial incentives in the tax schedule and requires that inevitable and unavoidable trade-offs are made between individuals who receive different levels of tax rates. Increasing the work incentives for one group or in one part of the earnings distribution necessarily requires that those incentives are decreased for some other group or in some other range. But a more attractive set of policy options consists of those that combine these considerations with work programmes drawn from a mix of employment and human capital strategies for different segments of the recipient population. Worth exploring are greater connections between individuals on benefit and the educational sector, sectoral employment and training strategies—including some with conditionality, even if only in a mild form—and other strategies to increase long-run earnings capabilities.

Race and ethnic inequalities

Mirza,

Warwick

2024

This article considers inequalities across racial and ethnic groups in the UK and finds that there is no single story of advantage or disadvantage. Racial and ethnic inequalities are complex and characterized simultaneously by continuity rooted in historical origins and conditions and rapid change fuelled by new and changing populations and opportunities. Continuity and change are also reflected in very different patterns of inequality across (and within) minority groups, generations and outcomes. Some groups are characterized by high levels of average qualifications, income and wealth, while others are persistently disadvantaged, faced with elevated levels of poverty and unemployment. Alongside different levels in outcomes are varied trajectories, both within and across generations. Within groups, there are less-explored, intersectional contours of difference, along the lines of gender, geography and class. Research and policy must acknowledge this diversity and complexity to inform effective policy prescriptions going forwards.