Tax-benefit system ‘more redistributive’ for women

Changes to the tax and benefit system over the last two decades have strengthened its ability to reduce inequalities in women's lifetime income, according to a new think-tank study. A life-cycle perspective was adopted on women's lives in order to see how the system affects work incentives and redistributes income.

Key points

  • The single most important recent change has been the increase in work-contingent support for low-income families with children, beginning with the working families tax credit introduced in 1999 by the former Labour Government.
  • The working families tax credit was especially powerful in reducing inequality among women in the low-education group. This was partly because it was targeted at those with low income: but also because it increased employment among a group with relatively low attachment to the labour market, thus reducing inequality in both gross and net income.
  • Furthermore, 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.
  • The tax-benefit system is now 'particularly good' at ensuring that lone motherhood does not lead to persistent inequalities in lifetime income.

Source: Mike Brewer, Monica Costas Dias and Jonathan Shaw, A Dynamic Perspective on How the UK Personal Tax and Benefit System Affects Work Incentives and Redistributes Income, Briefing Note 132, Institute for Fiscal Studies
LinkBriefing Note

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