Tax-benefit Policies and Parents' Incentives to Work: The Case of Australia 1980-1997

Abstract

This paper examines the relationship between unemployment and tax-benefit provisions for families with different numbers of children over the 1980s and 1990s in Australia. How have government policies influenced incentives to work for parents in families with different numbers of children during the 1980s and 1990s? And how can these changing incentives be related to the labour market activities of parents in these families? To examine these important questions we use tax-benefit modelling techniques on hypothetical families to show that for most of the 1980s and 1990s, the Australian tax-benefit system caused considerable incentive problems for low-paid workers, particularly those with several children. However, we also show that of themselves, these incentive problems appear unlikely to be responsible for the consistently high unemployment levels, or low employment levels, found among parents of large numbers of children.