From the position of social benefit users and recipients of unemployment benefit, monetary social benefits may create work disincentives because their amounts usually steeply decrease when an individual becomes employed. This can discourage (re)employment and/or longer work.
The analysis for Croatia has shown that almost all people (including beneficiaries in the social welfare) would benefit from employment, but this benefit is relatively small. Cases and types of families with significant incentives have been found because of very high marginal effective tax rate when moving from unemployment or inactivity to employment.
According to calculations, with regard to work “paying off” in Croatia, vulnerable families are those in which an employed member can only earn a low wage, families that receive all types of available benefits and assistance, families with only one employed adult member, and families with several children. The most important determinants of the marginal effective tax rates were shown to be subsistence allowance and unemployment benefit.