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Policy strategies for increasing labour participation

Comments on Judith Sloan “PM won't get two million more into jobs this way”, 4/04/2011, http://www.theaustralian.com.au/national-affairs/pm-wont-get-two-million-more-into-jobs-this-way/story-fn59niix-1226032907131

There are a number of good policy options that can increase labour participation rates, market flexibility, economic efficiency and people's living standards.

1. The employment income for people over a certain age, say, 60, or 65 should not be taxed at all and should not be counted to affect their other income for tax purpose.

2. The minimum wages should not be allowed to increase more than inflation plus a fraction of economy wide labour productivity increase to make it a safety net but not to decrease market efficiency.

3. People on minimum wages and standard working hours of 7.30 should not be taxed, that is, the minimum tax threshold should be set at least at that level and indexed with the rate of increase in minimum wages.

4. To encourage people to reduce welfare trap and dependence, the welfare withdrawal should ensure that their marginal tax rates don't increase within a sufficient level of income.

5. Welfare benefits should generally not be allowed to exceed people on minimum wages, unless they are seriously medically handicapped.

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