revised version published as ''Evaluationg the Cost-Effectiveness of In-Work Benefits: A Simulation Study for Switzerland' in: German Economic Review, 2007, 8 (4), 447 - 467
Income support for working low income families (the “working poor”) is on top of the political
agenda in Switzerland. The current social assistance system is considered inadequate to
support working poor households. Labour unions propose the introduction of a general
minimum wage, whereas the Swiss government promotes in-work benefits. Based on a
structural labour supply model this paper provides microsimulation results of the effects of
introducing different schemes of in-work benefits. It turns out that adding a minimum hours
requirement to the current social assistance system is the most cost-efficient reform.
Minimum wages are ineffective in fighting poverty.
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