The Impact of Policy Change on Job Retention and Advancement

Richard Dickens and Abigail McKnight

Published October 2008

This paper examines the impact of the Working Families Tax Credit (WFTC) on employment retention and advancement. The WFTC, which replaced Family Credit in October 1999, supplemented earnings of low paid workers living in low income families. It was designed to increase the financial incentive for low skilled workers to find and remain in work and in the process boost their family income. It finds evidence that WFTC increased employment retention among male recipients. WFTC does not appear to have increased wage growth compared with Family Credit but there is no evidence that employers were able to use the more generous WFTC to keep wage growth down.