The increased incentives to work delivered by the Government's reforms to the tax and benefit system have more than compensated for the disincentive provided by falling real earnings since the 2010 general election, a report has found.
The report by the Institute for Fiscal Studies economic think-tank found wide variations in the way in which different sections of the workforce are affected by the Government's tax and benefit reforms.
And it said that the overall impact of welfare cuts was "less dramatic than might be expected" in making work pay. Incentives are strengthened much less for those with children than those without children.
Some two million workers see their effective marginal tax rate (EMTR) - the proportion of an increase in earnings which is lost to higher taxes or lower benefits - reduced by 20 percentage points or more, making it considerably more attractive to take up a job or increase hours. But for one million, EMTR rises by 20 percentage points or more, making work less financially rewarding.
The report considered reforms that have been implemented, or are due to be implemented, from when the coalition Government took office in May 2010 until the scheduled end of its term of office in May 2015.
These include £11 billion-a-year of increases in personal taxes and £22 billion of benefit cuts, as well as the integration of six existing benefits into Work and Pensions Secretary Iain Duncan Smith's flagship universal credit.
As a whole, the changes reduce participation tax rates (PTRs) - the proportion of total earnings lost to higher taxes or lower benefits - by 2.5 percentage points, rising to five points or more for 7.5 million people and 20 points for 1.6 million.
However, some workers lose out, with PTRs rising by five percentage points or more for 3.5 million people and by 20 points for 1.1 million.
The report - entitled Do the UK Government's Welfare Reforms Make Work Pay? - found that, once fully in place, universal credit will strengthen the incentive for couples to have one person in work rather than none, but weaken the incentive for both to work.
Co-author Stuart Adam said: "The Government's welfare reforms strengthen financial incentives to be in work, on average, more than offsetting the weakening caused by falling real wages. But there is huge amount of variation in these effects, with large numbers of people seeing big rises or falls in effective tax rates.
"Changes in non-financial work incentives and in the perception of how the tax and benefit system works are also likely to be important - and are much harder to quantify. The overall effects of these changes on behaviour remains to be seen."