Blundell, Richard; (2024) Beyond tax credits and the minimum wage: the challenge of labour market inequality. Fiscal Studies 10.1111/1475-5890.12361. (In press).

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Abstract

Since the turn of the millennium, the UK has relied almost exclusively on two policies to address the adverse consequences of low pay and labour market inequality: in-work tax credits and the minimum wage. Successful as these policies have been at supporting family incomes and propping up hourly wages at the bottom, increasing numbers of less-educated workers find themselves in low-quality jobs with negligible wage growth, little training and poor career prospects. Work by itself is rarely a route to earnings progression. This paper looks at the motivation behind the expansion of in-work tax credits in the face of growing wage inequality and in-work poverty. It focuses on the impact on longer-term outcomes through human capital and skills. It argues for a balance of policies that goes beyond tax credits and the minimum wage to foster individual wage growth and improve opportunities for career progression for less-educated workers.

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