Income inequality within couples and redistribution through the tax-benefit system: the case of the...

Income inequality within couples and “redistribution” through the tax-benefit

system: the case of the UK

Holly SutherlandInstitute for Social and Economic Research, University of Essex

GeNet conference on Gender Inequalities in the 21st Century26 - 27 March 2009, Queens' College, Cambridge

2

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

3

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

4

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 self-employment, 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)

5

Couples by female share of original income

• 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

0

2

4

6

8

10

12

zero

up to

5%

5-10

%

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

5%

95-1

00%

100%

Female share of original income(6% of couples with zero original income excluded)

% o

f co

up

les

6

Composition of couple disposable income

-50%

-25%

0%

25%

50%

75%

100%

125%

150%

1 2 3 4 5 6 7 8 9 10

working age couple disposable income decile group

% o

f d

isp

osa

ble

inco

me

other taxes

NICs

income tax

in w ork benefits

child benefits

family benefits

benefits: individual cost related

benefits: individual earningsreplacement

original income

7

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.

8

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

9

Male-female income gap before and after taxes and benefits

-40%

-20%

0%

20%

40%

60%

1 2 3 4 5 6 7 8 9 10

working age couple income decile group

Gap

in m

ale-

fem

ale

inco

mes

(%

of

dis

po

sab

le in

com

e)

Original

Disposable (support)

Disposable (receipt)

Disposable (assessment)

10

Change in male-female income gap due to taxes and benefits

-10%

0%

10%

20%

30%

40%

1 2 3 4 5 6 7 8 9 10


Red

uct

ion

in g

ap in

mal

e-fe

mal

e in

com

es (

% o

f d

isp

osa

ble

inco

me)

Support

Receipt

Assessment

11

Change in male-female income gap due to taxes and benefits (“Support”)

-20%

-10%

0%

10%

20%

30%

40%

1 2 3 4 5 6 7 8 9 10


per

cen

tag

e p

oin

t re

du

ctio

n in

mal

e-fe

mal

e in

com

e g

ap

NICs - w oman

income tax - w oman

NICs - man

income tax - man

cost related benefits -man

earnings replacementbenefits - man

cost related benefits -w oman

earnings replacementbenefits - w oman

net reduction in male-female gap

12

Change in male-female income gap due to taxes and benefits (“Assessment”)

-20%

-10%

0%

10%

20%

30%

40%

1 2 3 4 5 6 7 8 9 10


per

cen

tag

e p

oin

t re

du

ctio

n in

mal

e-fe

mal

e in

com

e g

ap

Child benefit

NICs - w oman

income tax - w oman

NICs - man

income tax - man






13

Change in male-female income gap due to taxes and benefits (“Receipt”)

-60%

-40%

-20%

0%

20%

40%

60%

80%

1 2 3 4 5 6 7 8 9 10


per

cen

tag

e p

oin

t re

du

ctio

n in

mal

e-fe

mal

e in

com

e g

ap

in-work benefits - man

family benefits - man

in-work benefits - woman

family benefits - woman

child benefits - woman

NICs - woman

income tax - woman

NICs - man

income tax - man

cost related benefits - man


cost related benefits -woman

earnings replacementbenefits - woman


14

Couples by female share of original income

• 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

0

2

4

6

8

10

12

zero

up to

5%

5-10

%

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

5%

95-1

00%

100%

Female share of original income(6% of couples with zero original income excluded)

% o

f co

up

les

15

Change in male-female income gap due to taxes and benefits (“Receipt”)

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0-5% 5-25% 25-50% 50-95% 95-100%

female share of couple original income

% p

oin

t re

du

ctio

n in

mal

e-fe

mal

e g

ap

in-w ork benefits - man

family benefits - man

in-w ork benefits - w oman

family benefits - w oman

child benefits - w oman

NICs - w oman

income tax - w oman

NICs - man

income tax - man






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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?

Income inequality within couples and redistribution through the tax-benefit system: the case of the...

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