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Supply side policy in operation - Universal Credit

Jonny Clark

9th December 2015

A Level students are told that supply-side policies are the ultimate government response to support economic performance. If they can get the supply side policy right, it should have a positive impact on one of the main indicators (such as economic growth) without having a contrasting impact on another one (e.g. inflation).

The Government's role-out of Universal Credit has not been without controversy. The plan is to simplify the benefit system and incentivise a return to work for those who were claiming JobSeekers allowance. A key feature of the policy is to gradually reduce benefits to workers as they remain in employment and thus counteract the trap that was caused by the sudden loss of benefits if a claimant started to work beyond 16 hours a week.

The Department of Work and Pensions have a released a report (which you can read here) that indicates that the role out of UC has lead to a 8% improved chance that someone will return to work and earn more money than the incentives that lay with Jobseekers allowance.

This is pretty compelling evidence of a government policy that appears to work and might be a great example for an Economics student to use.

Of course, a good student, will include a lot more analysis on the impact of UC then just the data that is provided here. How does UC impact on the different regions in the UK? Has it impacted more on low-paid then on higher-paid growth-leading jobs?

Jonny Clark

Jon Clark has been teaching economics and business studies for over 25 years primarily in the Further Education sector. Before joining tutor2u, he was a senior manager at South Cheshire College in Crewe.

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