Concetta Gigante, from the University of Liverpool, discusses Universal Credit policy changes and whether they make a difference to low-income workers.
The effective use of resources is among the primary goals of a government. In my latest research I was excited to investigate the impact of the Universal Credit benefits system on labour market outcomes. I addressed two important questions of the Universal Credit system:
- Does the increase in income allowance at age 25 increase workers’ incentives towards hours of work?
- How much difference did a 2021 boost to UK welfare payments actually make?
Why should we care?
The Universal Credit benefits system is an important source of income for low-income workers. In the UK, about 31.58% of the low-income female workers and 29.71% of the low-income male workers eligible for the Universal Credit allowance are on a part time contract working 15 hours or fewer per week (based on my estimates). This proportion represents a substantial amount of the UK population, which poses questions to the government on the efficient allocation of resources.
To be eligible for Universal Credit benefits, low-income workers need to meet some eligibility rules, along with experiencing a change in the employment and housing status. The benefits system states that at age 25, low-income workers receiving the benefits obtain a substantial increase in the benefit rate. Moreover, in November 2021 the UK government approved a major boost to the benefits system that increased work allowance by £500 yearly.
Additionally, the timing of the policy boost can be instructive on the effectiveness of the policy. In March 2021, low-income workers were still in receipt of the weekly income allowance due to the pandemic. This expired in October 2021 before the implementation of the boost. Being in receipt of several income payments could have changed workers’ incentives to work different hours, which could mask the true effect of the policy.
These factors motivated me to research the importance of the underlying features of the scheme and the individual characteristics that lead low-income workers to change their worked hours.
How did I examine these questions?
I investigated these questions using data from the Census 2021 safeguarded individual microdata at region level for England and Wales, which is a national representative sample of 5% of the UK population. The major advantages of using this dataset are that it contains detailed information on housing tenure, deprivation, distance of travel to workplace, method of transportation and its large sample size provides more accurate estimates of the policy.
I used housing tenure and deprivation as sources for identification and sorted low-income workers into industry sectors.
Finally, I studied the factors leading to a change in the probability of raising hours of work for low-income workers receiving the Universal Credit benefits.
If you want to know more about how I analysed this dataset, you can read my paper available here.
What did I find?
I found that the rise in income benefits at age 25 causes a positive upward change in the hours of work of low-income workers with the estimated effect being statistically significant, although it is small in magnitude. The small impact effect indicates that low-income workers may delay the speed at which they exit the Universal Credit scheme.
Interestingly, in the counterfactual scenario I also discovered that the policy boost of November 2021 resulted in a positive impact on low-income individuals receiving the boost by raising worked hours of those who work 16-30 hours per week.
My analysis shows that the age at which low-income workers receive the increase in the income benefits and the time of implementation of the policy boost play an important role in delivering a positive effect on worked hours of low-income workers, which is one of the main labour market outcomes that indicates the health of the labour market.
I presented the findings to the UK Census User Conference 2025, which showcased the wealth of information inside UK Census data. My research led to discussions on the importance of connecting low-income workers in longitudinal datasets.
Impact
I hope my research, and my conference talks, will have a positive impact on the lived experiences of low-income workers in the UK. This is because they underscore the importance of setting in-work progression programmes and further income benefits increases that can help low-income workers to progress in their work.
More research is needed to better understand the effect of the Universal Credit scheme on employment outcomes of low-income workers and inform ongoing government decisions on this important welfare scheme.
You can read more about this research in my working paper available here.
About the author
Concetta Gigante is PhD Candidate in Economics at the University of Liverpool funded by the UKRI ESRC.
Concetta’s research interests include questions related to labour market inequalities, unemployment, workers’ productivity, economic growth and public economics.
She has recently analysed the gender wage gap and examined structural variations on wage inequality in the UK using data from the Quarterly Labour Force Survey.
To find out more about Concetta’s research, connect with her on LinkedIn and follow her on Bluesky.
Other stories you’ll find interesting
Comment or question about this blog post?
Please email us!