An overview: what do we know about policies to make work pay?

Several countries have introduced policies aimed at enhancing the employment opportunities for groups at the margins of the labour market – those with little work experience and/or low skills (henceforth referred to as the low-skilled for simplicity) – while at the same time maintaining socially acceptable wage rates and income distributions. These policies to “make work pay” are implemented either through employment-conditional benefits and tax credits or through employment subsidies and payroll tax rebates given to employers. Since these policies cut across traditional boundaries between government departments and economic disciplines it is not surprising that the different institutions and approaches involved have not converged on one set of objectives against which policies could be assessed, and (unsurprisingly) emphasis on the various dimensions of policy differs.