We must not ignore plight of low-paid men as once we ignored that of working women

a newspaper article by Paul Johnson published by the Institute for Fiscal Studies [via South West Skills Newsletter]

On average, women earn about 20 per cent less per hour worked than men. This persistent gap has, unsurprisingly, driven a lot of political concern, not to say outrage. It has also led to an increasing amount of research that is throwing a much clearer light on what is happening, if not on how to fix the problem.

We know that the wage gap is particularly associated with what happens in the labour market after women become mothers. They often spend some time out of work and, more importantly, often return to work part-time. In Britain, part-time work is heavily penalised. Women also tend to reduce their commuting times after they become mothers, giving them less choice of jobs and employers.

Men, on the whole, do not move to part-time work or reduce their commutes after they become fathers. Choices made within the family unit and choices made by employers over how they pay and promote those who work part-time or limited hours both matter enormously.

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Child poverty in Britain 'set to soar to new record'

an article by Larry Elliott published in the Guardian

IFS forecast that 37% of children will be in relative poverty by 2022 would see all progress made in the last 20 years undone


A young girl walking through a housing estate in Skelmersdale, Lancashire.
Photograph: Alamy

The number of children living in poverty will soar to a record 5.2 million over the next five years as government welfare cuts bite deepest on households with young families, a leading UK thinktank has said.

New research from the Institute for Fiscal Studies predicts an increase of more than a million in the number of children living in poverty, more than reversing all the progress made over the past 20 years.

The IFS said freezing benefits, the introduction of universal credit and less generous tax credits would mean a surge in child poverty and that the steepest increases would be in the most deprived parts of the country.

“Across all regions, relative child poverty is projected to increase markedly,” the IFS said. “The smallest increases are in the south, but even there relative child poverty is projected to rise by at least four percentage points. The northern regions, the Midlands, Wales and Northern Ireland are projected to see increases of at least eight percentage points.”

The report’s findings, which also predict a widening of the gap between rich and poor and four more years of weak income growth, pose a direct challenge to Theresa May, who arrived in Downing Street pledging to help those “just about managing”.

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A dynamic perspective on how the UK personal tax and benefit system affects work incentives and redistributes income

an IFS Briefing Note (BN132) by Mike Brewer (Institute for Economic and Social Research, University of Essex and Institute for Fiscal Studies) and Monica Costa Dias and Jonathan Shaw (Institute for Fiscal Studies)

Executive summary

• This briefing note summarises a project that took a life-cycle perspective to understand how taxes and benefits affect incentives to work and earn more, and the way in which they redistribute income. It analysed the simulated lifetimes of women (and their families) whose characteristics are taken from survey data and whose behaviour is derived from a model of individual decision-making that broadly replicates what is actually observed amongst real individuals in the UK.

Work incentives

• The effect of taxes and benefits on work incentives is commonly assessed using the marginal effective tax rate (METR) and the participation tax rate (PTR). Both measure the fraction of a rise in earnings that is lost to extra taxes and lower benefits – the former for an incremental rise in earnings and the latter for the rise in earnings from moving into work.
• Family circumstances have a large impact on the work incentives faced by women. Lone parents tend to face the highest METRs, but low PTRs, reflecting the relatively generous amount of in-work support that is then means-tested away as earnings rise. Women in childless couples generally enjoy the strongest work incentives, because such women are unlikely to be entitled to in-work support and because they are unlikely to be entitled to out-of-work benefits were they not to work. Women in couples with children face METRs that can be higher than those for women in couples without children, but not as high as those for working lone parents, and they tend to face higher PTRs than lone parents or women in couples without children.
• But family circumstances do not remain constant, and this means that there is considerable variability in work incentives across individuals’ lives. For example, there are large changes in the fraction of women in work facing very high METRs as women age, with the 75th percentile of METRs for the low-education group rising by well over 20 percentage points between ages 20 and 40, before falling.
• A more complete impression of how the tax and benefit system affects work incentives is given by taking into account the future consequences of working today (e.g. more experience leading to higher wages) and the possibility that work decisions tomorrow may change as a result. For some women, our impression of whether taxes and benefits weaken work incentives is affected considerably by taking this dynamic viewpoint. In particular, the true incentive to work facing lone mothers may be weaker, on average, than a static analysis suggests, partly because lone mothers will not all be lone mothers in the future and partly because lone mothers tend to face strong incentives to work but weak incentives to earn more. In general, across different levels of education, it is for low-education women that the static and forward-looking measures are most likely to differ.

Inequality and redistribution

• Disparities in gross income are particularly marked during the main child-rearing years and are largest for those with relatively low education. The birth of children, family transitions and their impact on women’s labour market behaviour are at the root of this pattern. But the UK tax and benefit system is particularly effective at reducing these large inequalities, particularly for women with low education.
• A substantial proportion of lifetime disparities (about 35 per cent) are established at the beginning of working life, driven by characteristics such as wealth, education and ability. A smaller proportion of them arise due to family circumstances experienced throughout women’s lives, especially lone motherhood. But we find that the UK tax and benefit system is particularly good at ensuring that lone motherhood does not lead to persistent inequalities in lifetime income.
• Changes to the UK tax and benefit system over the last two decades have strengthened its ability to reduce inequalities in lifetime income. The single most important change was the increase in work-contingent support for low-income families with children that began with the working families’ tax credit. This was especially effective in reducing inequality among women in the low-education group because it was targeted at those with low income and it increased employment, thus reducing inequality in both gross and net income. Because time out of the labour market can have permanent effects on future earnings, encouraging women to work when children are present can reduce lifetime inequalities as well as cross-sectional ones.

Full text (PDF 35pp)