Abstract
Modern welfare states face a remarkable conundrum: despite the efforts aimed at activating the unemployed and making work pay, vacancies remain difficult to fill and joblessness perseveres. Even people facing strong financial incentives to work appear not to act upon them. The link between financial incentives and entry into work is clearly less strong than is assumed. Against this background, the fundamental question remains how accurate and valid these models are since they are still rooted in the traditional economist's notion that 'work must pay'. It may well be the case that the current financial incentives modelling is flawed and does not represent the reality of all benefit recipients. Concretely, this project will investigate welfare-to-work transitions with particular attention to low work intensity households at the fringes of the labour market. The main objective is 1) to expose the interactions between employment pathways, individual characteristics, family context, work history and the tax-benefit system; 2) to innovate the modelling of financial work incentives by introducing novel factors; and 3) to examine to what extent the (re-)modelled incentives are actually associated with transitions into work and out of poverty. This way, the research plan will allow us to 1) address important shortcomings in prior research, which is critical for enhancing our understanding of the mechanisms underlying disappointing labour market outcomes; and 2) optimise social policy.
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