Fiscal systems and female employment in Europe

Abstract

Before the economic crisis set in, there was evidence of some convergence on the Lisbon target employment rate for women (Eurostat Statistics in Focus 99/2008). Nevertheless, serious disparities persist across European countries and regions, and the crisis is hampering progress. In the second quarter of 2009, just two years away from the final Lisbon deadline, 13 Member States fell short of the target. Some of the inter-country disparities in women’s employment hide segments of informal labour; others mainly reflect structural, regional imbalances; yet others stem from inadequate incentives: work may not pay enough or only some types of work do so, e.g. part-time work or so-called mini jobs. Large and growing segments of female labour, such as lone mothers, continue to face high risks of ‘in-work’ poverty. The tax and benefit system is an important policy tool for re-shaping incentives to work, addressing in-work poverty or ensuring adequate income protection. Taxation policy has traditionally addressed fairness and other issues of redistribution through progressivity and tax deductions. However joint taxation systems where taxes are assessed against the income of the couple rather than that of the individual may discourage the labour market participation of the female partner when the tax schedule is progressive. The 1984 study of the European Commission (EC 1985) was one of the first official documents to bring attention to this fact and it was instrumental in persuading several countries to switch to individual taxation.