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In-Work Tax Credit does not improve health of parents

Wellington campus

Thursday 30 May 2013 9:23am

Researchers from the University of Otago, Wellington have found that the In-Work Tax Credit, which has been applied in New Zealand since 2006, has no discernible effect on the health of parents.

The Survey of Family, Income and Employment (SoFIE) was used to study the effect that the In-Work Tax Credit had on the self-rated health of 6900 parents over seven years. The In-Work Tax Credit is generally an end of year deduction from the total tax paid for low and middle income families, and contributes up to 7% of national average income from wages.

While increasing the health of the population is not an explicit goal of the In-Work Tax Credit, it is possible that positive health effects could be a spin–off from increased income and employment for low-income earners.

However, this latest study has found that becoming eligible for In-Work Tax Credit has no discernible effect on the self-rated health of parents. An increase of $1,000 per year was also found to have no health effect.

“Our findings are perhaps surprising as internationally there’s strong interest and an expectation that social protection policies will filter through to health improvements, as well as improved standards of living,” says lead researcher, Frank Pega, from the Department of Public Health and the Harvard School of Public Health.

“We couldn’t study effects on children, but it’s possible that the In-Work Tax Credit has a positive effect on the health of children. However, it could be argued that we should have also seen some positive spin-off effects with regard to the health of their parents.”

Pega says international research shows that in-work tax credits fulfil their dual goal of increasing income in people living in or at risk of poverty, and moving welfare recipients into paid employment, at least during periods of high labour demand.

“Since the In-Work Tax Credit is only one of four Working For Families tax credits, we caution against generalizing our findings to the entire Working For Families package,” he says.

“Other countries have similar in-work tax credits, such as the Earned Income Tax Credits in the USA. We’re currently systematically reviewing the health effects that in-work tax credit interventions have on parents in other high-income countries.”

This study was funded by the University of Otago and Fulbright New Zealand. It was published in the international Journal of Epidemiology and Community Health.

For further information contact

Frank Pega
Health Inequalities Research Programme
Department of Public Health
University of Otago, Wellington
Tel 64 4 385 5541

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