Government Policies

Evaluating intervention policies to reduce inequality

 

  • Higher minimum wage- An example of this would be national minimum wage raising to £7 after 2015 election. A higher NMW would boost work incentives as it increases take home pay. However it  could cost some jobs so unemployment might increase and it could lead to higher prices.
  • http://www.bbc.co.uk/news/uk-politics-31907601
  • Free provision of services- An example of this would be free NHS treatment and free state education. Free provision would allow access to merit goods not based on ability to pay . However universal access is not as effective as targeted provision.
  • Higher rates of income tax- An example of this is that 45% top rate of income tax might be raised to 50% again. A progressive tax on the rich will lowers inequality, while also raising revenue. However if income tax is increased there is a risk of brain drain and increased tax avoidance.
  • Investment in training- An example of this is subsidies for work place training/internships. Investment will help raise productivity, increase jobs and increase real wages. It’s also effective in the long run but it’s risks the free raider problem.
  • Subsidies for childcare- An example of this is that in 2014 there was a maximum government contribution of £2000 a year for each child. It will improve incentives for mums to look for work and take work if they are getting childcare. Therefore this intervention effective but the quality of the child care needs improving.
  • http://www.dailymail.co.uk/femail/article-2228433/Whys-state-obsessed-subsidising-childcare-mothers-young-children-want-stay-home.html

It appears that things like investment in training would be more effective than say subsidies for childcare as they have a wider scope.

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