Marissa Mayer, Google's 20th employee, becomes Yahoo!'s new CEO

A move up and out for Google's star

Marissa Mayer, a Silicon Valley veteran who was previously the head of local, maps and location services at Google, has been hired by Yahoo! to come in as their new CEO, their third in ten months and fifth in three years.

Mayer is one of Google's superstars. As the company's 20th employee, she is responsible for much of the backbone of the company, from the iconic simple white homepage (the original was never as good looking) to some of the its strongest products, such as GMail, Google Images and Google News. She was also Google's first female engineer, and has consistently been one of the most important players.

But Mayer also hit a ceiling at Google. The "triumvirate" of co-founders Larry Page and Sergey Brin and the company's longest-running CEO, Eric Schmidt, was impossible to break into, leaving her one tier down. She still ran a very important department, and was on the company's operating committee, but there was little to no chance of her moving to one of the top jobs. Even though it comes as a surprise, then, her departure makes sense.

From Yahoo!'s point of view, choosing Mayer is very important for one key choice the company has to make: whether to turn towards media, or remain a tech company. Like AOL, another internet services company which leveraged its "portal" into a powerful content provision network, Yahoo! is a valuable media company in its own right, and many had assumed that its new CEO would come from that realm. But the inference one can draw from the hiring of Mayer is that Yahoo! views itself as a tech company first and foremost, and is trying to get that house in order before it goes anywhere further.

Neither arm of the company has been particularly well run for the past few years, and Mayer has her work cut out for her. PaidContent reports the board's belief that "most of the company is search and mail and the home page," core competencies which Mayer will be familiar with, but which are also undoubtedly withering under Yahoo! as it is currently constituted.

And when it comes to more forward-looking services, Yahoo! has a poor history indeed. The company has previously acquired and killed – or as good as killed – the popular companies Flickr and, earning it a twin reputation of being dangerous to be bought by and not the sort of place you want to keep your data. Mayer will have to work hard to overcome that reputation, and if the company can't buy its way out of the trouble, it will have to innovate instead, particularly when it comes to the mobile sector, where it has barely any presence at all.

Mayer has a peculiar set of incentives going into her new role. Having started at Google long before the company was profitable, she spent a lot of time being paid in equity: equity which is now extremely valuable. As a result, she is probably one of the few CEOs of a Fortune 500 company for whom her actual remuneration doesn't really count for much. Whether this is a good thing, allowing her to focus on the long term without worrying about the source of her next paycheck, or a bad thing, enabling her to take the sort of risks that no one ever would if they had "skin in the game", remains to be seen.

She is also a example of a woman determined to, in the words of a current debate, "have it all": Mayer is expecting a son in early October. The Yahoo! board didn't know that when they first approached her, but were reportedly unconcerned when they found out last Wednesday. Mayer, for her part, doesn't expect it to conflict with her new role. She told Fortune:

I like to stay in the rhythm of things. My maternity leave will be a few weeks long and I'll work throughout it.

Marissa Mayer. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Q&A: What are tax credits and how do they work?

All you need to know about the government's plan to cut tax credits.

What are tax credits?

Tax credits are payments made regularly by the state into bank accounts to support families with children, or those who are in low-paid jobs. There are two types of tax credit: the working tax credit and the child tax credit.

What are they for?

To redistribute income to those less able to get by, or to provide for their children, on what they earn.

Are they similar to tax relief?

No. They don’t have much to do with tax. They’re more of a welfare thing. You don’t need to be a taxpayer to receive tax credits. It’s just that, unlike other benefits, they are based on the tax year and paid via the tax office.

Who is eligible?

Anyone aged over 16 (for child tax credits) and over 25 (for working tax credits) who normally lives in the UK can apply for them, depending on their income, the hours they work, whether they have a disability, and whether they pay for childcare.

What are their circumstances?

The more you earn, the less you are likely to receive. Single claimants must work at least 16 hours a week. Let’s take a full-time worker: if you work at least 30 hours a week, you are generally eligible for working tax credits if you earn less than £13,253 a year (if you’re single and don’t have children), or less than £18,023 (jointly as part of a couple without children but working at least 30 hours a week).

And for families?

A family with children and an income below about £32,200 can claim child tax credit. It used to be that the more children you have, the more you are eligible to receive – but George Osborne in his most recent Budget has limited child tax credit to two children.

How much money do you receive?

Again, this depends on your circumstances. The basic payment for a single claimant, or a joint claim by a couple, of working tax credits is £1,940 for the tax year. You can then receive extra, depending on your circumstances. For example, single parents can receive up to an additional £2,010, on top of the basic £1,940 payment; people who work more than 30 hours a week can receive up to an extra £810; and disabled workers up to £2,970. The average award of tax credit is £6,340 per year. Child tax credit claimants get £545 per year as a flat payment, plus £2,780 per child.

How many people claim tax credits?

About 4.5m people – the vast majority of these people (around 4m) have children.

How much does it cost the taxpayer?

The estimation is that they will cost the government £30bn in April 2015/16. That’s around 14 per cent of the £220bn welfare budget, which the Tories have pledged to cut by £12bn.

Who introduced this system?

New Labour. Gordon Brown, when he was Chancellor, developed tax credits in his first term. The system as we know it was established in April 2003.

Why did they do this?

To lift working people out of poverty, and to remove the disincentives to work believed to have been inculcated by welfare. The tax credit system made it more attractive for people depending on benefits to work, and gave those in low-paid jobs a helping hand.

Did it work?

Yes. Tax credits’ biggest achievement was lifting a record number of children out of poverty since the war. The proportion of children living below the poverty line fell from 35 per cent in 1998/9 to 19 per cent in 2012/13.

So what’s the problem?

Well, it’s a bit of a weird system in that it lets companies pay wages that are too low to live on without the state supplementing them. Many also criticise tax credits for allowing the minimum wage – also brought in by New Labour – to stagnate (ie. not keep up with the rate of inflation). David Cameron has called the system of taxing low earners and then handing them some money back via tax credits a “ridiculous merry-go-round”.

Then it’s a good thing to scrap them?

It would be fine if all those low earners and families struggling to get by would be given support in place of tax credits – a living wage, for example.

And that’s why the Tories are introducing a living wage...

That’s what they call it. But it’s not. The Chancellor announced in his most recent Budget a new minimum wage of £7.20 an hour for over-25s, rising to £9 by 2020. He called this the “national living wage” – it’s not, because the current living wage (which is calculated by the Living Wage Foundation, and currently non-compulsory) is already £9.15 in London and £7.85 in the rest of the country.

Will people be better off?

No. Quite the reverse. The IFS has said this slightly higher national minimum wage will not compensate working families who will be subjected to tax credit cuts; it is arithmetically impossible. The IFS director, Paul Johnson, commented: “Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.” It has been calculated that 3.2m low-paid workers will have their pay packets cut by an average of £1,350 a year.

Could the government change its policy to avoid this?

The Prime Minister and his frontbenchers have been pretty stubborn about pushing on with the plan. In spite of criticism from all angles – the IFS, campaigners, Labour, The Sun – Cameron has ruled out a review of the policy in the Autumn Statement, which is on 25 November. But there is an alternative. The chair of parliament’s Work & Pensions Select Committee and Labour MP Frank Field has proposed what he calls a “cost neutral” tweak to the tax credit cuts.

How would this alternative work?

Currently, if your income is less than £6,420, you will receive the maximum amount of tax credits. That threshold is called the gross income threshold. Field wants to introduce a second gross income threshold of £13,100 (what you earn if you work 35 hours a week on minimum wage). Those earning a salary between those two thresholds would have their tax credits reduced at a slower rate on whatever they earn above £6,420 up to £13,100. The percentage of what you earn above the basic threshold that is deducted from your tax credits is called the taper rate, and it is currently at 41 per cent. In contrast to this plan, the Tories want to halve the income threshold to £3,850 a year and increase the taper rate to 48 per cent once you hit that threshold, which basically means you lose more tax credits, faster, the more you earn.

When will the tax credit cuts come in?

They will be imposed from April next year, barring a u-turn.

Anoosh Chakelian is deputy web editor at the New Statesman.