Doodledog - I've been thinking about in-work benefits first. The concept of topping up low wages dates back to 1795 and ever since, policy makers have struggled. There's the basic humane principle that in-work benefits are predicated upon of preventing people from starving, being homeless etc, then there's the question of how low wages should be allowed to be (hence eventually the introduction of the minimum wage but that was preceded by the Trades Board Act of 1909). And then of course, if you accept the basic principle of not wanting people to starve and accept the concept of the minimum wage (and not everyone does) policy makers then have to address the issues that you list such as being trapped with scant incentive to work more hours, or try for promotion.
There are no easy solutions to this apart from adjusting the taper rate at which in-work benefits are reduced. (if we accept that people should be helped). It's so easy to criticise all the various attempts at trying to address the issue of in-work benefits but incredibly difficult to come upon with a solution. Reform did come up recently with the idea of overtime pay being tax free and I could absolutely see the logic behind that but I couldn't find any real details on how it would really work.
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