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The Gender Impact of Tax-Benefit Policy

This presentation explores the concept of gender budgeting and its impact on tax-benefit policies. It also examines gender differences in incomes and the effect of tax-benefit changes from 2008 to 2018. The findings highlight the need for gender-responsive policies to promote gender equality.

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The Gender Impact of Tax-Benefit Policy

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  1. The Gender Impact of Tax-Benefit Policy Dr. Claire Keane Economic and Social Research Institute SPA/CHASM Seminar, Birmingham February 12th 2019

  2. Gender Budgeting • The Council of Europe defines gender budgeting (GB) as a ‘gender based assessment of budgets incorporating a gender perspective at all levels of the budgetary process and restructuring revenues and expenditures in order to promote gender equality’. • The purposes of GB: • promote accountability and transparency in fiscal planning • increase gender responsive participation in the budget process • to advance gender equality and women’s rights

  3. Gender Budgeting The OECD (2016) categorises gender budgeting into three types of system: • Gender-informed resource allocation • Gender-assessed budgets • Needs-based gender budgeting • Half of OECD countries report that they have or are actively considering the introduction of GB. • We carry out a gender impact assessment – how tax-benefit policies impact differently by gender.

  4. Gender Differences of TB Systems • Although tax-benefit systems do not differentiate by gender, there are gender implications of tax-benefit policy. • Gender based divisions of work and caring roles, gender pay gap…. • Benefit recipients e.g. child benefit; carers, lone parent & jobseekers payments etc. – gender aspect. • Earnings – tax, social insurance etc.

  5. Gender Differences in Incomes Source: Authors’ calculations using 2018 SWITCH policies linked to pooled SILC data from 2013 and 2014, reweighted to represent the 2018 population.

  6. Framework

  7. Framework I • Most distributional analyses of tax-benefit policy are carried out at the household level. • Gender impact assessment (GIA) requires a departure from this. • Individual level analysis under two different assumptions about tax unit income: • Split equally between partners. • Assigned to the physical recipient. • “True” gender impact lies somewhere between these bounds: • closer to the former (Watson et al, 2013) but the latter also informs about bargaining power/consumption.

  8. Framework II • We use SWITCH, the ESRI’s tax-benefit model (linked to pooled 2013/14 SILC data) which is reweighted & adjusted to be representative of the 2018 population (demographics, income etc.) • SWITCH takes individual level information on demographics, labour market status etc. & simulates disposable income after taxes and transfers on the same (2018) population: • Using indexed 2008 policy rules • Using 2018 policy rules • This allows us to isolate the impact of tax-benefit policy changes alone on the incomes of men and women.

  9. Tax-Benefit Changes, 2008-2018 Taxation/Social Insurance: • No major change in income tax rates (20%/40%). • Decreases in the standard rate band. • Decreases in tax credits. • Ceiling on social insurance contributions abolished. • Increased taxation via a ‘income/health levy’ (now USC). • Property tax introduced.

  10. Tax-Benefit Changes, 2008-2018 Benefit measures: • Nominal cuts to benefits during austerity years, some recovery in recent years but didn’t keep pace with wage inflation • Over 65 rates protected from cuts. • Cuts to (universal) child benefit. • Tightening of eligibility to lone parent benefits.

  11. Results

  12. Results - singles

  13. Results - singles

  14. Results - couples

  15. Results - couples

  16. Results – by economic activity

  17. Results – austerity vs. recovery budgets

  18. Conclusion • No major gender differences in the impact of budgetary policy over the last decade for childless singles in Ireland • (Female) lone parents lost out by more than other singles • Under the assumption that couples pool their income, losses for partnered men and women similar to single men and women • Mainly driven by tax but welfare changes also impacted the bottom of the income distribution

  19. Conclusion • If couples do not fully pool their income, working age partnered women lost significantly more than working age married men • Difference driven by welfare reforms • Losses were particularly sharp for partnered women at the lower end of the income distribution. • Most income losses and most of the gender differences in income losses occurred during the austerity period.

  20. Additional Slides

  21. The Effect of Tax-Benefit Systems on Gender Earnings GapsKarina Doorley (ESRI, Dublin & IZA)Claire Keane (ESRI, Dublin)

  22. Introduction • Wages of men and women converging • Still an unexplained gender wage gap (Blau & Kahn, 2017; Redmond & McGuinness, 2017) • Gender differences in labour force participation and hours of work sizable (Olivetti & Petrongolo, 2008). • The combined effect of the gender wage gap and gender work gap is a gender gap in labour income which varies across countries. • implications for equality and poverty both during working life and into retirement.

  23. Introduction • Policy interventions have been shown to help close the gender pay gap • equal pay legislation, collective bargaining and minimum wages (Blau and Kahn, 2003; Polachek & Xiang, 2015; Bargain et al, 2018) • Equally, policy can tackle the gender work gap • individual taxation of spouses, childcare subsidies (Bick & Fuchs-Schündeln, 2017; Brewer et al, 2016) • But, given the gender gap in labour income, tax-benefit policy can also re-distribute between men and women • tax-benefit polices are not typically targeted by gender but are usually progressive so that women pay less tax and benefit more from the welfare system

  24. This paper • Evaluate the capacity for tax-benefit systems in a number of European countries to cushion the gender earnings gap • The degree to which the gender earnings gap is affected by the tax-benefit system depends on the size and source of the gender earnings gap and the nature of the tax-benefit system • Develop a decomposition method to separate the cushioning effect of the tax-benefit system into its cushioning effect • on the gender wage gap • on the gender work gap

  25. Analysis • IE, NL, DK,EL, RO for now. • EUROMOD is also used to simulate counterfactual distributions needed for the decomposition • Predict counterfactual wage for women, if they were paid as men • Assume labour supply and non-labour income are invariant to this wage change (to be relaxed in future work) • Apply 2016 tax-benefit policies to new earnings income distribution.

  26. Preliminary Results

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