The In-Work Benefit Calculation

and Work

Diana KasparovaPolicy Studies Institute

CRSP 2006

Background to research

• The goal - reducing child poverty and having 70% of lone parents (LP) in work by 2010

• Initiatives aimed at moving LPs and couples from welfare to work and at encouraging them to stay in work include LPWFI

• Provision of the financial incentives to work and communicating this through IWBC during a LPWFI

• Worklessness among lone parents fell from 60% to 49% between 1996 and 2002

Structure of presentation

1. Aim of research and research questions

2. Data (LPWFI survey and admin)3. Challenges and preliminary

investigation4. Methods of analysis5. Findings and conclusions 6. Policy implications7. Remaining questions

Aim of research and research questions

• Explore the association between IWBC and work outcomes

• Work outcomes – likelihood of work entry and speed of work entry

• Five IWBC outcomes • Two LP groups: new/repeat and

existing claimants

Data

• LPs that are eligible for LPWFI in 2001:– new/repeat (flow) claimants of IS with youngest child

aged 5 years and 3 months up to 16, – existing (stock) claimants of IS with younger child

aged between 13 and 15 years 9 months

• LPWFI survey – the main source of data• Administrative data, mainly on claimants’

children

Existing claimants

New/repeat claimants

Total claimants

LPWFI period Survey interview

period 1,161 1,570 2,731 August -

October 2001 February - April 2002

Challenges

• Consistency of IWBC delivery across clients, jobs, JC+

• ‘Conflation’ of IWBC with other LPWFI elements

• Relationship between the number of IWBC and work entry both positive and negative

• Policy differs between new and existing claimants and their characteristics differ (see preliminary investigation)

Preliminary investigation 1

• Flow claimants as likely to get IWBC as stock ones

• But flow LPs are more likely to enter work and tend to enter work more quickly

• Receiving IWBC has a limited impact on work outcomes? Other factors more important to work outcomes?

Preliminary investigation 2• Both flow and stock LPs who received IWBC

are more likely to achieve work outcomes than those who did not

• Those who got IWBC (both flow and stock LPs) differ from those who did not in demography, health status, ‘human capital’, desire to work

• Same differences between those who moved into work (both flow and stock LPs) and those who did not

• Same differences between flow and stock LPs

Implications

• Claimants’ characteristics may affect both IWBC receipt and work outcomes

• IWBC outcomes rather than receiving IWBC may be associated with work outcomes

• Need to exclude those without IWBC• Need to focus on IWBC outcome at initial

LPWFI• Need to focus on the first 12 months after

initial LPWFI

Methods of analysis

• Separate analyses for flow and stock LPs• Likelihood of (first) work entry within the

first 12 months– Probit• Days to (first) work entry within the first

12 months– continuous duration analysis• Covariates: IWBC outcome (5 models),

characteristics of claimants (demo, education, barriers to work, region, etc.)

Findings - IWBC

Received IWBC Received positive IWBC

Received IWBC Work outcome

Client group

positive negative extra 21 or more pounds a week

extra 41 or more pounds a week

extra more than 20 pounds a week

extra more than 40 pounds a week

Work entry

Flow + 0 + + + +

Stock 0 0 0 0 0 0

Speed of work entry

Flow + 0 0 + + +

Stock 0 0 0 0 0 0

Findings – Work entry

• Flow LPs – 40% entered work – desire to work prompts work entry– barriers to work relate to caring responsibilities,

children and childcare– no difference between the models depending on

whether better off by more than £20 or £40 a week

– but some differences between those with positive IWBC outcome and those with any IWBC outcome

– and importance of £21+ outcome among those with positive IWBC outcome

Findings – Work entry

• Stock LPs – 29% entered work – desire to work prompts work entry– barriers to work relate to lack of

skills/confidence and health– those with positive IWBC outcome face

fewer barriers than those with any IWBC outcome

– but not much difference between the models depending on whether better off by more than £20 or £40 a week

Findings – Time to work

• Flow LPs – 99 days to first work entry on average – positive IWBC outcome prompts work entry– among those with positive IWBC, speed is

greater if better off by more than £40 a week– overall, those with financial concerns tend to

postpone their work entry unless their IWBC outcome exceeds £20 a week

– barriers to work relate to age of LPs, number of their children and caring responsibilities

– older age of the youngest child and the desire to work speed up LPs work entry

– statistical significance of non-recall

Findings – Time to work

• Stock LPs – 135 days to first work entry on average – those with positive IWBC outcome differ

from those with any IWBC outcome in barriers to work they face

– the desire to work speeds up LPs work entry – if those with financial concerns are told to

expect to be better of by £21+ a week they tend to enter work more quickly than those without financial worries

Conclusions

• Differences between flow and stock LPs in:– association between IWBC and work– barriers to work

• Similarities between flow and stock LPs with a positive IWBC outcome in:– desire to work– financial worries seem to be addressed if IWBC

outcome is £21+ a week (the speed of work entry)

– Caring responsibilities (the speed of work entry)

Policy implications

• Policy measures should differ between existing and new/repeat client groups

• They should target various and specific barriers to work

• They need to account for heterogeneity of each group (flow and stock) and some similarities between those with positive IWBC

• Stock LPs are likely to be harder to reach than flow LPs, hence may require more resources

Remaining questions

• Same results:– if the time period is extended?– if the IWBC delivery process, survey

design and data quality (esp on children) are improved?

– if another cohort of LPs is considered?

• IWBC or some other LPWFI elements have an impact on work outcomes?

Thank you