New in-work benefit for low-income workers in Estonia

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On 15th June 2015, the Estonian Parliament adopted legislative changes that implement an annual in-work benefit for low-income workers. The first submission of applications and the pay-out of benefits will be made in spring 2017. This new in-work benefit aims to raise living standards of low-paid workers while encouraging people to take up and declare a full time regular job. It also creates high marginal effective tax rates for low-paid workers and therefore, as a lump sum annual benefit omitting part-time workers, may not be the most cost-effective way to target in-work poverty.

Authors: Andres Võrk and Cenely Leppik