The National Minimum Wage and its interaction with the tax and benefits system: a focus on Universal Credit [research report for the Low Pay Commission]

Publication type



Publication date

August 15, 2013


This paper examines the likely impact of Universal Credit (UC) on the incomes and work incentives of families containing NMW workers.
The study, by the Institute of Social and Economic Research, considers tax and benefit data on the basis that families don’t alter their employment (or other) decisions in response to Universal Credit (UC), and it assumes full take-up of all benefits and tax credits.
It concludes that both families for whom National Minimum Wage (NMW) jobs are the main source of earnings and families for whom NMW jobs are a secondary source of earnings are forecast to lose (very) slightly from UC.
But families for whom NMW jobs are a secondary source of earnings are forecast to lose more, consistent with the redistributive nature of the pattern of winners and losers. There is a great deal of variation within these small, ‘on average’, changes, some of which is related to family type.
The analysis reflects announcements in the December 2012 autumn statement, but was completed before the Spring 2013 Budget, so doesn’t reflect any changes to personal taxes and benefits for 2014 to 2015 that were announced then.




Informs: Low Pay Commission (2014) National Minimum Wage: Low Pay Commission Report 2014: presented to Parliament by the Secretary of State for Business, Innovation and Skills by Command of Her Majesty March 2014. [London]: Stationery Office.

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