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The welfare system has three critical roles in relation to paid work and the labour market. First, and most fundamentally, it provides income security when people do not have an income from work. Second, a well-designed welfare system provides financial incentives for working. Current problems include poverty traps that mean some people have little or nothing to gain financially from seeking to increase their income through additional paid work. These two roles are discussed in chapter 7 (page 94). Third, alongside income support, an effective welfare system provides employment support, for example, active labour market programmes (ALMPs) and other assistance that help people get into work, stay in work, and increase or adapt their skills to meet labour market opportunities. This aspect of the welfare system has been badly neglected in recent years. The current approach has focused too narrowly on reducing the number of people on benefits and short-term fiscal costs with insufficient regard for the suitability of the jobs people go to, of people’s and their family's wellbeing, or for the support required to find or remain in work. Changes to address these issues are discussed in 'Delivering effective employment support'.

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