This paper [considers] the work incentives of the employed and the financial motives underpinning decisions to remain in paid work. This is of particular relevance to policies aimed at extending the working lives of mature age workers. To measure work incentives, [the authors] use a microsimulation model covering a comprehensive range of Australian taxes and benefits; it allows [analysis of] interactions between taxes and benefits over almost a decade (2001-2009). The model is operationalised using a nationally representative longitudinal survey - the Household, Income and Labour Dynamics in A
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This paper [considers] the work incentives of the employed and the financial motives underpinning decisions to remain in paid work. This is of particular relevance to policies aimed at extending the working lives of mature age workers. To measure work incentives, [the authors] use a microsimulation model covering a comprehensive range of Australian taxes and benefits; it allows [analysis of] interactions between taxes and benefits over almost a decade (2001-2009). The model is operationalised using a nationally representative longitudinal survey - the Household, Income and Labour Dynamics in Australia (HILDA) Survey. The authors present work disincentive estimates, in the form of [replacement rates] RRs [the ratio of income when out of work to income in work], of how Australians' financial circumstances would change as a result of transitioning from employment into unemployment or economic inactivity.
The paper profiles changes in work incentive measures over the first decade of the new millennium in order to detect whether the incentive to work has become stronger or weaker. It also explores variation in work incentives across subgroups in the population with a view to identifying those lacking a strong financial motive to remain in employment. The geography of work incentives is examined by comparisons drawn across state capitals and non-metropolitan regions. [The authors] then analyse whether the labour market behaviour of employed Australians is actually affected by work disincentives. Measures of work incentives are added to models that predict the probability of remaining in paid work.
The modelling results confirm that work incentives have a significant effect on the likelihood of remaining employed. The potential work disincentive effects inherent in Australia's tax-benefit system pose an ongoing dilemma for policy-makers striving to increase employment rates and extend working lives. [The authors conclude by offering] some observations on the significance of [the] findings.
Edited excerpts from publication.
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