Going social: the great tax-benefit balancing act
How do redistribution policies – such as family benefits, unemployment insurance or income taxes – affect the incomes of individual families? OECD tax-benefit models provide key indictors on benefit generosity and on tax burdens. They are part of the OECD’s database on tax-benefit policies, which is used to monitor redistribution policies for working-age people and their families. The results allow for comparisons of income adequacy and work incentives over time and across countries.
Recent OECD work (www.oecd.org/social/inequality.htm) has shown that household income inequality increased in a large majority of OECD countries, with an ever rising share of national income going to the wealthiest in society. This trend has continued, and sometimes intensified, during the recent economic crisis.
Analysis of the social impact of the crisis (www.oecd.org/social/societyataglance.htm) illustrates that benefit systems were key to cushioning income losses in the downturn. Well-designed benefit systems are also essential for helping jobless people back into employment, and work incentives are likely to become a stronger driver of employment as labour-market conditions improve. Tax and benefit policies must ensure “work pays” while also addressing the question of “fairness”, notably by ensuring that the most disadvantaged can access support that ensures an adequate standard of living.
With the newest update of tax-benefit policy indicators, more than a decade (2001-2012) of information is now available to shed light on tax and benefit policy reforms before and since the crisis and their effects on family incomes and work incentives across OECD countries. Results show, for instance, the effectiveness of social safety nets in softening the blow of the crisis. They also show how much families gain from employment, accounting for benefits, taxes and other work-related costs, such as for childcare.
Note: The information provided on this page has been produced with the assistance of the European Union.