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Making work pay? The labour market effects of capping child benefits in larger families

Reader, Mary ORCID: 0000-0002-2154-1813, Andersen, Kate, Patrick, Ruth, Reeves, Aaron ORCID: 0000-0001-9114-965X and Stewart, Kitty ORCID: 0000-0001-7744-8741 (2023) Making work pay? The labour market effects of capping child benefits in larger families. CASEpapers (CASE 229). Centre for Analysis of Social Exclusion, London, UK.

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Child benefits are typically paid on a per-child basis, without restrictions on family size. In this paper we generate unique evidence on the effects of capping child benefits by family size by examining the introduction of the UK’s ‘two-child limit’, which restricts means-tested child benefits to just two children per family. The UK government justified this policy on grounds that it would incentivise employment among larger families. We use mixed methods – combining quasi-experimental quantitative techniques and qualitative longitudinal research – to investigate the policy’s employment effects. We find no evidence that capping child benefits increases employment. Labour market activity among larger families seem to be particularly ‘sticky’ in response to reductions in benefits income, likely due to parents’ commitment to unpaid care, the scale of caregiving responsibilities and barriers to paid work. Our qualitative evidence also indicates that the effects of negative income shocks can render such policies counter-productive by pushing people further away from the labour market.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2023 The Authors
Divisions: STICERD
Social Policy
Centre for Analysis of Social Exclusion
Subjects: H Social Sciences > HC Economic History and Conditions
JEL classification: J - Labor and Demographic Economics > J0 - General > J08 - Labor Economics Policies
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J22 - Time Allocation and Labor Supply
I - Health, Education, and Welfare > I3 - Welfare and Poverty > I38 - Government Policy; Provision and Effects of Welfare Programs
H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H31 - Household
J - Labor and Demographic Economics > J1 - Demographic Economics > J13 - Fertility; Family Planning; Child Care; Children; Youth
Date Deposited: 05 Feb 2024 13:27
Last Modified: 16 May 2024 12:33

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