Changing families' financial support and incentives for working: Annex report 2
Employment incentives for couple parents: Labour market effects of changes to financial incentives and support. This report provides details of the methodology for the results presented in section 2.2 of the summary report.
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Introduction
Over the period October 2004 to April 2007, the New Zealand government introduced substantial changes to in-work incentives and financial support for families with dependent children as part of the Working for Families (WFF) package.
Inland Revenue (IR) and the Ministry of Social Development (MSD) have previously published an analysis of the impact of these changes on employment and benefit receipt outcomes for sole parents (Dalgety, Dorsett, Johnston and Spier, 2010). This report extends the previous analysis to consider the impact of the WFF changes on employment outcomes for couple families with dependent children.
The Working for Families package
The WFF package changed the financial incentives for low-to-middle income families with dependent children to be in paid work and increased the amount families received from entitlements such as family tax credit, Accommodation Supplement and Childcare Assistance.
The objectives of the WFF changes set out by Cabinet were to:
- make work pay by supporting families with dependent children, so that they are rewarded for their work effort
- ensure income adequacy, with a focus on low and middle income families with dependent children to address issues of poverty, especially child poverty
- achieve a social assistance system that supports people into work, by making sure that people get the assistance they are entitled to, when they should, and with delivery that supports them into, and to remain in, employment.
One of the key changes was the introduction in April 2006 of an in-work tax credit. This payment is conditional on the family not being in receipt of a main benefit, and on couple parents being in paid employment for at least a combined total of 30 hours a week or sole parents being in paid employment for at least 20 hours a week.
Further details about the WFF package can be found in earlier evaluation reports on the MSD and IR websites.1
Approach
The evaluation of the impact of the WFF changes on couple parents' employment used two analytical approaches:
- Difference-in-differences analysis using data from the Household Labour Force Survey, comparing couple parents to couples without dependent children.
- Survival analysis and longitudinal regression modelling of employment patterns for a subset of couples receiving WFF, using a research dataset of linked MSD and IR administrative data.
Key findings
The difference-in-differences and longitudinal regression modelling results provide evidence that couples with children were less likely to both be in employment after WFF, by around two percentage points.
The survival analysis results suggest that couples' spells with one income earner were longer, and their spells with two income earners were shorter, after WFF.
Date published: 26 Aug 2010
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