Labour Market Incentives

How can we get more people in work?

What is an incentive?

An incentive is something is used to motivate and encourage somebody to act a certain way.

Incentives can be used in the labour market, to encourage more people to work.

 

Working Tax Credits

Unemployment benefits can be claimed in the UK, there must be an incentive to go out and work. Working Tax Credits are an example of this – they are available to those on low incomes (but people who still go out and work). If you are eligible, you are paid a sum of money based on your individual case but in order to be eligible you must be in work.

 

Employment Allowance

Incentives can also be given to firms to increase the number of jobs available. Employment Allowance means that firms who pay employees up to £2000 in National Insurance contributions are exempt from paying it. Therefore, this reduces employment costs for firms and increases the demand for labour and job creation. This is particularly beneficial for smaller firms.

 

National Minimum Wage

The National Minimum Wage is also an incentive to work. It means that no matter who you are or your skill level, there exists a minimum level of income available for you to earn. This is particularly beneficial for immigrants where the NMW is higher than wage levels in their home countries.


So, in summary we have learned:

  1. What is an incentive?

  2. How can incentives attract more people to the labour force?


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