To work or not to work? How high childcare costs and taxes are discouraging women across Europe

The Directorate-General for Justice of the European Commission has published a new study, Secondary Earners and Fiscal Policies in Europe
by Olga Rastrigina (ISER, University of Essex) and Alina Verashchagina (Sapienza University of Rome) that examines work disincentives for secondary earners in Europe created by formal tax-benefit policies and implicit taxes such as out-of-pocket childcare costs. The analysis is based on two tax-benefit simulation models: EUROMOD and a modified version of the OECD tax-benefit model.

The study finds that secondary earners in Belgium, Germany, Slovenia, Portugal, and Luxembourg face substantial work disincentives at the intensive margin when compared to couples who share paid work equally. Moreover, fiscal disincentives are high in the United Kingdom, Ireland, Germany, Slovakia, Luxembourg, Slovenia, and the Czech Republic, for mothers envisaging entry into the labour market in a secondary earner position.

Overall the evidence suggests that either the design of the tax benefit system or out-of-pocket childcare costs, or both, affect the choice of working hours or the choice of entering employment among secondary earners. However, neither of these factors suffices on their own to account for country-specific employment outcomes.

Download the report.

The report was financed by and prepared for the use of the European Commission, Directorate-General for Justice;
Unit D2 ‘Equality between men and women’, in the framework of a contract managed by the Fondazione Giacomo
Brodolini (FGB) in partnership with Istituto per la Ricerca Sociale (IRS).


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