Transcript Income inequality within couples and “redistribution

Income inequality within couples and
“redistribution” through the tax-benefit
system: the case of the UK
Holly Sutherland
Institute for Social and Economic Research, University of Essex
GeNet conference on Gender Inequalities in the 21st Century
26 - 27 March 2009, Queens' College, Cambridge
Motivation & orientation (1)
• Original motivation: how changes in public (tax-benefit)
policies affect (within household) gender inequalities
– using income measures from POLIMOD, complementing (challenging)
the usual household-level analysis of income redistribution
– using findings from parts 1 and 2 of GeNet project 5 on relationships
between income and other inequalities
• But
– income as an individual outcome:
• picture blurred by joint accounts
• difficulties of survey measurement
– income as an influence on other within-household inequalities:
• qual evidence: for low income couples only and no clear-cut pattern
• quant evidence: own income can confer entitlement to resources and/or
influence over decision making – but not clearcut by income source
2
Motivation & orientation (2)
• How might taxes and benefits influence within-couple
inequalities?
– differential work incentives
– modifying “own income” may affect relative influence
 Income “redistribution” within couples
– not the process which transforms income to consumption
– not between households
– narrowing of income gap due to progressivity of tax-benefit system
• Does the tax-benefit system reduce the gap in income within
couples? Is the m-f effect symmetrical? Which parts of the
system have the most effect?
– sharing assumptions
– tax-benefit typology
3
Data, methods and assumptions
• Working age, co-resident m-f couples from Family Resources Survey
(FRS) N=12,055
• Simulated incomes from POLIMOD using data from FRS 2003/4 updated
to 2008/9; 2008/9 policies
• Disposable income concept as used by DWP in HBAI statistics, calculated
for benefit units and split into “male” and “female” income using
alternative assumptions
• Analysis by
– couple income decile group (disposable income equivalised using the modified
OECD scale)
– female share of couple original income (earnings from employment and selfemployment, investment income and between household transfers)
•
Analysis of
– male-female within-couple gap in income (measured as % couple disposable
income) – equally shared components have no effect
– (paper also looks at income shares)
4
Couples by female share of original income
12
% of couples
10
8
6
4
2
up
ze
ro
to
5%
510
10 %
-1
5
15 %
-2
0
20 %
-2
5
25 %
-3
0
30 %
-3
5
35 %
-4
0
40 %
-4
5
45 %
-5
0
50 %
-5
5
55 %
-6
0
60 %
-6
5
65 %
-7
0
70 %
-7
5
75 %
-8
0
80 %
-8
5
85 %
-9
0
90 %
-9
95 5%
-1
00
%
10
0%
0
Female share of original income
(6% of couples with zero original income excluded)
•
•
•
32% of original income is received by women; 72% of women have lower income
3 times as many couples with zero/low share female income (male breadwinner) as
male (female breadwinner)
16% couples have female share 50-95%; 49% couples have male share in this range
5
Composition of couple disposable income
other taxes
150%
NICs
% of disposable income
125%
100%
income tax
75%
50%
in w ork benefits
25%
child benefits
0%
family benefits
-25%
-50%
benefits: individual cost related
1
2
3
4
5
6
7
8
9
10
w orking age couple disposable incom e
decile group
benefits: individual earnings
replacement
original income
6
Components of couple benefit/tax credit income
• Benefits paid purely because of the presence of children are termed “child
benefits”: Child Benefit and Child Tax Credit.
• Benefits to cover the costs of the couple or family are termed “family
benefits”: Income Support (including income-based JSA), Housing Benefit
and Council Tax Benefit.
• Benefits paid to individuals to cover additional costs are termed “individual
cost-related benefits”: Attendance Allowance, Disability Living Allowance,
Severe Disablement Allowance and training allowances
• Payments designed primarily to make work pay (“in work benefits”):
Working Tax Credit.
• “Individual earnings replacement benefits”: Jobseeker’s Allowance
(contributory), Industrial Injuries Benefits, Incapacity Benefit, Carer’s
Allowance and Maternity Allowance.
7
Alternative sharing assumptions
• Under all assumptions:
– Income tax and NICs allocated to person with corresponding earnings/income
– Individual cost-related and earnings-replacement benefits to that individual
– Council Tax, Council Tax Benefit and Housing Benefit split equally
• “Support” – all other benefits split equally
• “Receipt”
– Child Benefit and Child Tax Credit (child benefits) are allocated to the mother
– Working Tax Credit (in work benefits) is allocated to the person with the higher
earnings (and in the event of a tie, to the man).
– Income Support is allocated to the person in the couple most likely to have
made the original claim (a) to person in receipt of an earnings-replacement
benefit (b) to person without any earned income; otherwise equally.
• “Assessment”
– Child Benefit to the mother
– all other benefits (incl. CTC) split equally
8
Gap in male-female incomes (% of
disposable income)
Male-female income gap before and after taxes and
benefits
60%
40%
Original
20%
Disposable (support)
Disposable (receipt)
0%
Disposable (assessment)
-20%
-40%
1
2
3
4
5
6
7
8
9
10
w orking age couple incom e decile
group
9
Reduction in gap in male-female
incomes (% of disposable income)
Change in male-female income gap due to taxes and
benefits
40%
30%
20%
Support
Receipt
10%
Assessment
0%
-10%
1
2
3
4
5
6
7
8
9
10
w orking age couple incom e decile group
10
Change in male-female income gap due to taxes and
benefits (“Support”)
percentage point reduction in male-female
income gap
40%
NICs - w oman
income tax - w oman
30%
NICs - man
20%
income tax - man
10%
cost related benefits man
0%
earnings replacement
benefits - man
cost related benefits w oman
-10%
-20%
1
2
3
4
5
6
7
8
9
10
w orking age couple incom e decile group
earnings replacement
benefits - w oman
net reduction in malefemale gap
11
Change in male-female income gap due to taxes and
benefits (“Assessment”)
Child benefit
percentage point reduction in male-female
income gap
40%
NICs - w oman
30%
income tax - w oman
20%
NICs - man
income tax - man
10%
cost related benefits man
0%
earnings replacement
benefits - man
-10%
cost related benefits w oman
-20%
1
2
3
4
5
6
7
8
9
10
w orking age couple incom e decile group
earnings replacement
benefits - w oman
net reduction in malefemale gap
12
Change in male-female income gap due to taxes and
benefits (“Receipt”)
80%
in-work benefits - man
percentage point reduction in male-female income gap
family benefits - man
60%
in-work benefits - woman
family benefits - woman
40%
child benefits - woman
NICs - woman
20%
income tax - woman
0%
NICs - man
income tax - man
-20%
cost related benefits - man
earnings replacement
benefits - man
-40%
cost related benefits woman
-60%
1
2
3
4
5
6
7
8
9
working age couple income decile group
10
earnings replacement
benefits - woman
net reduction in malefemale gap
13
Couples by female share of original income
12
% of couples
10
8
6
4
2
up
ze
ro
to
5%
510
10 %
-1
5
15 %
-2
0
20 %
-2
5
25 %
-3
0
30 %
-3
5
35 %
-4
0
40 %
-4
5
45 %
-5
0
50 %
-5
5
55 %
-6
0
60 %
-6
5
65 %
-7
0
70 %
-7
5
75 %
-8
0
80 %
-8
5
85 %
-9
0
90 %
-9
95 5%
-1
00
%
10
0%
0
Female share of original income
(6% of couples with zero original income excluded)
•
•
•
38% of original income is received by women; 72% of women have lower income
3 times as many couples with zero/low share female income (male breadwinner) as
male (female breadwinner)
16% couples have female share 50-95%; 49% couples have male share in this range
14
Change in male-female income gap due to taxes and
benefits (“Receipt”)
40%
in-w ork benefits - man
family benefits - man
30%
in-w ork benefits - w oman
% point reduction in male-female gap
20%
family benefits - w oman
child benefits - w oman
10%
NICs - w oman
income tax - w oman
0%
NICs - man
-10%
income tax - man
cost related benefits man
-20%
earnings replacement
benefits - man
cost related benefits w oman
-30%
earnings replacement
benefits - w oman
-40%
0-5%
5-25%
25-50%
50-95%
95-100%
net reduction in malefemale gap
fem ale share of couple original incom e
15
Summary
•
For most couples the main driver narrowing the gap in their incomes is income tax,
followed by National Insurance contributions.
•
Child benefits have the most significant equalising effects among low income
couples - if we assume that they are received by mothers.
•
Under the “receipt” assumption there is a strong role for child benefits in keeping
the female share of disposable income higher for women in couples in the bottom
fifth of the distribution than it is for women in higher income couples.
•
On this basis child benefits also have a large disequalising effect (increasing the
female share) among female breadwinner couples.
•
Generally, individual earnings replacement benefits play a bigger role for men than
they do for women. In aggregate they increase the within-household income gap.
They are particularly important in narrowing the female-male gap in female
breadwinner couples and less important for women in male-breadwinner couples.
•
Cost-related benefits play a similar role for men and women.
•
In-work benefits appear to be more important in widening the female-male gap for
female breadwinner couples than they are in widening the male-female gap in male
breadwinner couples.
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Concluding questions
• If relative own income confers entitlement/influence, does the
source or purpose of the income matter?
• Is it the share or the (absolute or %) gap that matters?
• What tax-benefit reforms would be interesting to examine in
this way?
17