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Author(s): Giuseppe Carone, Klara Stovicek, Fabiana Pierini, Etienne Sail, European Commission
Recent
reforms of the tax and benefit systems in the framework of flexicurity -
Giuseppe Carone, Klara Stovicek, Fabiana Pierini, Etienne Sail (2 MB)
This paper provides an analysis of recent reforms of tax-benefit systems and
a preliminary assessment of their impact on financial incentives to work and on
labour supply. Many Member States have introduced policies to “make work pay”
and have targeted low-wage workers with the aim of increasing their take-home
pay. The labour market improvements observed over recent years are a sign that
structural reforms have started to pay off. The reduction of disincentives to
work and to hire, especially for the low-skilled, embedded in tax and benefit
systems, a greater link with activation policies and a stronger reliance on
preventive and targeted active labour market policies (ALMPs), and widespread
wage moderation are all factors that have contributed to the structural
improvement in the functioning of labour markets. Yet, despite these
improvements, in view of the ageing of the population and rapid technological
change, more progress is needed to further increase and maintain high levels of
employment and participation rates, especially among female and older workers,
and to reduce structural unemployment. Member States should continue along the
line of reforms followed so far. The Commission has stressed the importance of
a comprehensive strategy of labour market reforms ("flexicurity") that
shift the focus from protection on the job to insurance in the market. These
reforms would enable workers to move more smoothly from declining to expanding
activities, thus easing tensions in the adjustment process, while ensuring
adequate income support and responding to potential anxieties among European
citizens.
JEL classification J01, J08, J20, J65, E24, J31, J32, H20, H5
DOI 10.2765/92751
KC-AH-09-043-EN-C (online) | |
ISBN 978-92-79-11255-3 (online) | |
ISSN 1725-3195 (online) | |
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