Discuss how changes in the WTC that came into effect the 1st April 2016, i.e. (1) a cut in the income threshold from £6,420 to £3,850 a year and (2) an increase in the withdrawal rate from 41% to 48%, would affect the number of hours Pete would choose to work 2 under the new contract compared with his labour supply before the policy change (i.e. fiscal year 2016/17 vs. 2015/16).
Description Its February 2016 and Pete is a single 27 years’ old living and working in England. Pete works a given number of hours per week earning £5.3 per hour. In addition to his labour income, Pete receives Working Tax Credits (WTC). Both payments are made on a weekly basis. Pete and his employer have […]