New Nuffield-funded analysis from the Institute for Fiscal Studies shows that time-limited in-work benefits can help increase the probability of moving into paid work and also improve job retention.
In a new IFS briefing note Mike Brewer and Jonathan Cribb examine the effectiveness of two time-limited in-work benefits. These were introduced in Britain in the early to mid 2000s and were known as ‘in work credit’ (IWC) and the ‘Employment Retention and Advancement demonstration’ (ERA).
- The positive impacts of these benefits persisted after the benefits stopped being paid. Four years after first being eligible for payments, IWC led to one additional lone parent being in paid work out of every 100 who could have received it, and ERA led to four additional lone parents being in paid work out of every 100 who could have received it.
- Encouraging full-time work seemed to be much more effective than encouraging part-time work. Some lone parents offered incentives to work part-time cut their hours in response. Encouraging part-time work had a very small impact on retention. Encouraging full-time work had a much larger impact, although we cannot discount that some of this was due to other aspects of the ERA programme.
- Policymakers wanting to improve job retention and progression, or implement universal credit’s in-work conditionality, should consider the role of financial incentives alongside personal advice. The authors endorse Matthew Taylor’s recent conclusion: ‘There is currently a lack of understanding about what progression really is, let alone what works best in supporting people to achieve it.… Government should seek to develop a better understanding of what progression at work is and [how] public policy levers influence it. Building on the trials to date, Government should work with external providers to determine what really works in supporting individuals to obtain better quality – and not just more – work.’