• It creates a disincentive either to look for work or work longer hours because of the effects of the income tax and welfare benefits system.
• For example, a worker might be given the opportunity to earn an extra £60 a week by working ten additional hours. This boost to his/her gross income is reduced by an increase in income tax and national insurance contributions.
• The individual may lose some income-related welfare benefits and the combined effects of this might be to take away over 70% of a rise in income, leaving little in the way of extra net or disposable income.
• When one adds in the possible extra costs of more expensive transport charges and the costs of arranging childcare, then the disincentive to work may be quite strong.

Revision Video: The rise and rise of Food Bank usage in the UK