The increased adoption of means-tested benefits and tax credits in the UK and elsewhere has refocused employment policy on creating incentives for lower-skilled individuals to gain and retain employment. This has been the subject of increased attention in our research.

Ageing of the population has also focused attention on incentives for early retirement in the benefit and pension systems. Quantifying their impact is essential in designing effective policy and evaluating policy reform. IFS has carried out extensive modelling of labour supply decisions, and these models are being developed further to address important new tax, benefit and pension policy questions.

There are three main areas where further development is planned. First, labour supply decisions within the family. This area is particularly relevant given the growing importance of in-work benefits and childcare subsidies. Second, incentives in the tax and welfare system for employment retention and earnings enhancement once in the labour market. This is closely allied to the issue of wage progression and our research on human capital accumulation. Third, labour supply decisions for older workers and the complex interactions between early retirement incentives in pension systems, incapacity benefit rules and working opportunities for older people.

Retirement incentives and labor supply

| Book Chapters

‘Retirement Incentives and Labor Supply’ in A. Woodland and J. Piggott (eds) Handbook of the Economics of Population Aging, Chapter 1, Vol 1B, Elsevier.

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The changing educational attainment of graduate recruits to major public sector occupations

| External publications

Public sector pay has been squeezed since public spending cuts began to take effect from 2011, and it looks set to be squeezed even further up to 2020. However, this comes on the back of an increase in public sector wages relative to those in the private sector during the Great Recession. There is currently significant policy interest in the extent to which continued stagnation in public sector wages will affect the ability of the public sector to recruit and retain high-quality workers, although to date little is known about the potential effects.

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The ageing population

| Video clip

Why is the UK experiencing an ageing population, and what does that mean for the public finances? Carl Emmerson, Deputy Director of the Institute for Fiscal Studies, explains.

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