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Bookmark this page: www.oecd.org/els/social/workincentives
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Going social: the great tax-benefit balancing act
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New evidence from the 2011 Divided We Stand report dispelled the myth that as the rich get richer, the benefits trickle down and boost jobs and wealth for everyone. In the years up to the crisis, household income inequality increased in a large majority of OECD countries, with an ever increasing share of national income going to the wealthiest in society.
The economic crisis has added urgency to the need to address inequality. The challenge is to foster employment which enables people to escape poverty and offers real career prospects. For this to happen, tax and benefit policies must ensure “work pays” while also addressing the question of “fairness” by ensuring that the most disadvantaged still have an adequate standard of living.
New data on tax and benefit policies in OECD countries helps answer questions such as:
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How much do existing tax and benefit systems benefit or penalise people increasing their work hours or getting a part-time or full-time job?
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How generous are unemployment benefits?
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What standard of living is assured by safety-net benefits?
With this update of tax-benefit policy indicators, there is now a decade of information (2001 – 2010) available here (main indicators, country specific files, OECD tax-benefit calculator and tax-benefit models). These data assist in answering these questions by facilitating cross-country comparisons and analysis of time trends of the effects of taxes and benefits on the incomes of working age individuals and their families both in and out of work.
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Main tax-benefit indicators:
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Excel files last updated: March 2012
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Work incentives
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Does it pay to work? Imposition of taxes combined with reductions in benefit entitlements reduce the financial gains of taking up employment or increasing hours of paid employment. High effective tax rates can create barriers to employment “trapping” families in low income situations:
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Benefit generosity
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How does benefit income compare to earned income? Net replacement rates, calculated taking tax-benefit regimes into account and considering the family as a whole, show the proportion of in-work income that is maintained when someone is unemployed, and provide important insights when considering both benefit generosity and incentives to work:
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An alternative perspective on benefit generosity is provided by Gross replacement rates which compare unemployment benefits received when not working to wages earned when employed:
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Income adequacy
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Do countries' tax-benefit regimes alleviate poverty risks? Measurement of family incomes in terms of median household incomes across countries provides a comparative perspective on the adequacy of benefit systems for those:
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Net income estimates and their components – taxes and social security contributions paid, benefits received and labour earnings - for different family types and labour market situations, are now also available on OECD.STAT.
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Tax-Benefit policies:
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Policy overview tables
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These tables summarise the key features of the main tax and benefit programmes, drawing together information from more detailed country descriptions to facilitate comparisons for selected years (2010, 2007, 2005). Excel files last updated: March 2012
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The tax and social security policy information is available from the OECD Tax database.
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Country specific information since 2001
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Detailed country-specific information on tax and benefit systems from 2001 to 2010. Includes in-depth descriptions of how the key national tax and benefit programmes operate, and also spreadsheets showing the resulting budget constraints for particular family situations. |
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Policies included in the models
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This table provides a summary indication of benefits, tax concessions and social contributions taken into account in the models. |
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Tax-benefit models:
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Models
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The models used for computing tax and benefit results in this publication are now available on an “as-is” basis to those interested in using them for research purposes. |
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Publications:
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The working papers are generally available only in their original language - English or French - with a summary in the other. |
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Related working papers No. 46, 51, 67, 76, 81, 100 are also available from here.
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* The information provided on this page has been produced with the assistance of the European Union.
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Benefits and Wages: Tax-Benefit calculator
Tax-Benefit Models
Society at a Glance 2011 - OECD Social Indicators
Society at a Glance - Asia/Pacific Edition 2011
