Taxing Wages 2024

2. Special feature: Tax and gender through the lens of the second earner

Introduction

This Special Feature uses Taxing Wages models and indicators to examine the tax treatment of second earners within married couples in OECD countries. Although the Taxing Wages methodology does not distinguish between male and female workers, women account for at least three-quarters of second earners (the lesser-earning spouse in Taxing Wages household types that include two adults) in most OECD countries (OECD, 2023[1]). By estimating the tax rates on second earners, the chapter provides insights into the incentives that the tax system provides for them to take up employment or increase the amount they work. As such, it aims to inform policies to address persistent gender gaps in labour market outcomes across OECD countries, in particular those related to labour force participation.

The Special Feature, which builds on analysis contained in the 2016 edition of Taxing Wages (OECD, 2016[2]), is structured as follows. First, it provides an overview of the disparities in labour market outcomes between men and women in OECD countries and outlines the potential role of taxes and transfers in this regard. Next, it explains the methodology, data and indicators that are used to examine the tax treatment of second earners in the chapter, as well as the assumptions and limitations inherent to this analysis. The third section examines the average tax wedge facing second earners upon taking up employment, which it compares to those of single workers across OECD countries, while a fourth section uses indicators that are new to Taxing Wages to examine the marginal tax wedge for second earners who increase the amount they work. A fifth section concludes.

Tax policy contributes to persistent disparities between men and women in the labour market

On average across OECD countries, women are paid less, are less likely to be employed and spend less time in paid work each year than men. Although the gaps in employment-related outcomes have narrowed in recent decades, gender equality in the labour market remains a distant prospect. This section briefly outlines some of the causes and consequences of these disparities and how the incentives faced by second earners in particular may contribute to the existence and persistence thereof.

Gender equality is a global priority, as articulated in Sustainable Development Goal (SDG) 5 of the 2030 Agenda for Sustainable Development.1 Aside from the importance of this objective vis-à-vis women’s social and economic rights, as well as social cohesion and democracy more broadly, greater gender equality is associated with a range of economic benefits (World Bank, 2024[3]). As stated by André et al (2023[4]) with reference to OECD countries, ‘Greater equality of opportunities between men and women would enhance social mobility, foster inclusiveness and boost economic growth through better use of talent.’

Among the most-scrutinised metrics of gender inequality in the labour market is the pay gap between men and women, which in OECD countries is driven by significant differences in the tasks and responsibilities between genders as well as by the concentration of women in low-wage firms and industries (OECD, 2021[5]). These discrepancies contribute to a ‘pensions gap’ later in life: on average across OECD countries, women aged 65 and over receive 26% less income than men from the pension system (OECD, 2021[6]).

Figure 2.1. The gender wage gap has narrowed but remains substantial across OECD countries

Wage gap at the median per year in 2010 and 2021

Note: Unadjusted difference between median wage of men and women relative to the median wage of men. Latest data for Belgium, Poland and Switzerland refer to 2020, for Slovenia and Türkiye refer to 2018 and for Luxembourg refers to 2014. Data for Chile for 2010 is the unweighted average between the available data for 2009 and 2011.

Source: https://stats-3.oecd.org/Index.aspx?DataSetCode=GENDER_EMP.

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The median full-time wage for women was 11.9% lower than that of men on average across the OECD in 2021, down from 14.1% in 2010 and 18.1% in 2000 (Figure 2.1).The gradual narrowing of the wage gap across OECD countries in recent decades is attributable to women’s higher educational attainment and a slow rise in the proportion of women in leadership positions, among other factors. Differences between the wages that men and women earn for work of equal value are small within OECD countries (OECD, 2023[1]).

Another key indicator of gender inequality in the labour market is the gap in labour force participation. On average across OECD countries, men were 10.4 percentage points (p.p.) more likely to be employed than women in 2021 (OECD, 2023[1]). This gap has declined in recent decades (by 5.4 p.p. between 2000 and 2010 and by 2.2 p.p. between 2010 and 2021), due in large part to an increase in female labour force participation: 64.6% of women were employed on average in the OECD in 2021, up from 55.7% in 2000 (OECD, 2023[1]).

There are also persistent gender gaps in the amount of time spent in employment. Women make up nearly two-thirds of the part-time labour force and are almost three times more likely to work part-time than men: on average across the OECD, 21.5% of working-aged women were employed on a part-time basis in 2021, compared with only 7.7% of men (Harding, Paturot and Simon, 2022[7]). Overall, men spent almost six hours per week more in paid employment than women on average across the OECD in 2022 (Figure 2.2). Although women’s labour force participation fell more sharply than men’s in the initial phase of the COVID-19 pandemic, it bounced back more strongly than men’s thereafter (Queisser, 2021[8]).

Figure 2.2. Women still work fewer hours per week in paid employment than men across OECD countries

Gender gap in the average usual weekly hours worked on the main job, total employment, men – women, 15-64 year-olds, 2010 and 2022*

Note: Latest data for Canada and Czechia refer to 2021. Data for the United States refer to dependent employment only. Data for Australia and Canada refer to average actual hours worked for all workers above the age of 15 years.

Source: OECD Employment Database, https://stats.oecd.org/Index.aspx?DatasetCode=AVE_HRS. Data for Australia is from the Australian Bureau of Statistics, https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia-detailed/latest-release.

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The gap in the time women spend in paid employment persists despite tight labour markets across OECD countries, with labour shortages reported across a number of sectors in some countries (European Union, 2023[9]). While these shortages have become an urgent short-term issue during and after the COVID-19 pandemic, they are also a long-term concern in a context where population ageing in OECD countries is expected to increase demand for female-dominated sectors, such as health and long-term care. At the same time, continued progress in closing gender gaps in pay and participation will require policies to ensure women are equipped and encouraged to participate in occupations that have a role in increasingly digitalised economies (OECD, 2023[1]).

Strategies to enhance the labour force participation of women cut across policy areas. Policies related to childcare are particularly important since the career trajectories of men and women tend to diverge when women have their first child (Angelov, Johansson and Lindahl, 2016[10]; Bertrand, Goldin and Katz, 2010[11]). Social norms, for example the expectation that men should be the primary breadwinner or that women should take on the majority of care work (paid and unpaid), may deter women from working full-time or from taking on more skilled jobs (OECD, 2023[12]). As it is, many women place a premium on jobs that allow flexible working practices: to women in the United Kingdom, for example, the option to work at home on a regular basis is worth just over 20% of the average annual salary, whereas for men this option is only worth about 7% (OECD, 2023[13]).

Numerous studies have found that the elasticity of women’s labour supply with respect to wages is high in absolute terms and tends to be higher for married women than for married men (although the elasticity has declined in recent years) (Keane, 2022[14]; CPB, 2015[15]). The elasticity is particularly high among women earning low incomes and in countries where female labour participation is lower (Bargain, Orsini and Peichl, 2014[16]). These findings hold at both the extensive margin (the decision to take up employment) and the intensive margin (the decision about how many hours to work) but have been found to be higher at the extensive margin.

A consequence of the high elasticity of female labour supply is that women’s employment may be strongly influenced by tax and transfer policies. There is a broad literature demonstrating that higher tax rates for the second earner in a married couple help to explain gaps in labour supply between men and women (Bick and Fuchs-Schündeln, 2018[17]; Chen et al., 2023[18]). The substantial rise in female labour force participation in Sweden over recent decades, particularly among married women, has been attributed in part to a reform in 1971 that ended the joint taxation of couples; for the first time, married women were thus taxed on an individual basis (Selin, 2014[19]). Similarly, a significant increase in the labour market participation of married women in the United States during the 1980s has been attributed to two reforms to the personal income tax that resulted in significantly lower effective tax rates for second earners (Kaygusuz, 2010[20]). At the same time, female labour market participation in Germany increased by more than 16 p.p. between 1991 and 2021 to 73.1% even though family-based taxation persisted throughout this period, highlighting the potential importance of non-tax factors such as childcare facilities or changes in social norms (Bundesministerium der Finanzen, 2024[21]).

Reducing effective tax rates on second earners has the potential to enhance both the efficiency of a tax system (by reducing the disincentive to work among this group) and its horizontal equity (by addressing a factor behind gender inequalities in the labour market) (Mastrogiacomo et al., 2017[22]; Thomas and O’Reilly, 2016[23]). Taxing spouses’ income on an individual basis may be effective in this regard, while also reducing the extent to which a woman’s labour force participation is influenced by how much their spouse earns or to which tax policy influences a couple’s decision to marry (Myohl, 2023[24]). As of 2023, 29 OECD countries implemented individual taxation policies, although in most cases these included tax reliefs (in particular tax credits) that are linked to the composition of the household or assessed at the household level (see Annex Table 2.A.1).

However, the justification for individual taxation on equity grounds is not straightforward.2 As this chapter demonstrates, the disincentives for second earners (whether taxed jointly or as individuals) to increase their labour force participation (as measured by the marginal tax wedge) are a consequence of progressive taxation (OECD, 2023[1]). This progressivity is key to reducing inequality of disposable income between men and women (or between full- and part-time workers). Moreover, higher tax rates for married couples may be considered equitable in a context where they tend to have higher disposable incomes than single individuals (therefore greater capacity to pay tax) and to be less vulnerable to income shocks (Carbonnier, 2021[25]; Schechtl, 2021[26]).

Meanwhile, individual income taxation may have unintended impacts on the incidence of other instruments not examined in Taxing Wages, such as the taxation of capital gains or the cap on non-standard tax reliefs. Low-income households may be left worse-off by a shift from household-level to individual taxation where this leads to a decline in tax revenues which, in turn, reduces funding available for public services and transfers upon which they rely more than higher-earning households (Bierbrauer et al., 2023[27]). Moreover, in some countries, such as Germany, legal regulations may exist that require a specific treatment of married households, in which case a shift to individual taxation may result in horizontal inequalities.3 The tension between different equity considerations, as well as between the distributional and social outcomes of fiscal policy more broadly, should be borne in mind when considering the results that follow.

Methodology, assumptions and limitations

This Special Feature builds upon the Taxing Wages models to analyse the tax treatment of second earners in OECD countries. In particular, it examines the fiscal incentives second earners face when considering whether to take up work or to increase the amount they work, thereby providing new evidence on fiscal incentives to increase labour supply at both the extensive and intensive margin. For this purpose, the chapter introduces two indicators not previously shown in Taxing Wages to analyse the effective tax rate on second earners.

The analysis examines effective tax rates for four household types, characterised by different earnings levels for the two working adults and the presence (or absence) of children. In certain cases, the results, some of which are shown in an Annex to this chapter, are compared with the tax treatment of single earners. The chapter also examines how these indicators have changed over time. The chapter does not compare the taxation of the two members of the same couple, i.e. the second earner and the primary earner at the same income level: the methodology underpinning this analysis implies that the average tax wedge for both is identical unless there are specific gender-based tax rules.4

Key indicators

The special feature primarily focuses on two indicators developed according to the Taxing Wages methodology:

• The average tax wedge faced by second earners when starting to work at 67% and 100% of the average wage, with and without children.5

• The marginal tax wedge faced by a second earner who increases their earnings level by 1% of the average wage or from 67% to 100% of the average wage, with and without children.

The methodology used to calculate these indicators means they should be interpreted as the tax burden borne by the household relative to the additional household income earned following the change in the second earner’s employment status (for the average tax wedge) or earnings level (for the marginal tax wedge). As such, the indicators calculated in this paper do not necessarily equate to the average and marginal tax burdens actually faced by the second earner as an individual in all the countries included in the analysis, as further explained in the Assumptions and limitations section below.

The indicators are computed as follows:

 

Average tax wedge of the second earner	Increase in income tax, employee and employer SSCs (net of inwork benefits) paid by the family as a result of the second earner entering the workforceIncrease in the family gross earned income and employer SSCs as a result of the second earner entering the workforce
Marginal tax wedge of the second earner (between X1% and X2% of the second earner’s average wage)	(Income tax+employee and employer SSCs -inwork benefits paid by the family at X2% of the AW) - (income tax+employee and employer SSCs- inwork benefits paid by the family at X1% of the AW)Labour costs at X2% of the AW-Labour costs at X1% of the AW

The analysis in this chapter begins by showing the average tax wedge for second earners across OECD countries to show how the tax-and-transfer system may affect the decision of a spouse to take up employment (the extensive margin of labour supply).6 The results are shown for a low-earning scenario (where the spouse earns 67% of the average wage) and an average-earning scenario (where the spouse earns 100% of the average wage). The results for second earners in couples with and without children are compared with those for single earners at equivalent income levels and with a similar household composition to show whether a spouse would face different incentives if they were single.

The average tax wedge in each country is then decomposed to show the relative weight of income taxes, employee and employer social security contributions (SSCs), and cash transfers7 for each household type to demonstrate which policies may have the greatest impact on second earners’ incentives to work. The average tax wedge for 2023 is then compared with those for 2014, which were discussed in the Special Feature of the Taxing Wages 2016 report (OECD, 2016[2]).8

Finally, the Chapter examines the incentives facing second earners when they increase employment (the intensive margin) by calculating two new Taxing Wages indicators that show the marginal tax wedge when a second earner:

• Increases their earnings by 1% of the average wage

• Increases their earnings from 67% to 100% of the average wage.

The results for second earners are compared with those for single workers with a similar household composition undertaking an equivalent change in earnings.

Dimensions

The four household types analysed in this chapter are distinguished in terms of the earnings level of the second earner and the number of children:

• A married couple (without children) where the principal earns 100% of the average wage and the second earner starts working at 67% of the average wage;

• A married couple (with two children) where the principal earns 100% of the average wage and the second earner starts working at 67% of the average wage;

• A married couple (without children) where the principal earns 100% of the average wage and the second earner starts working at 100% of the average wage; and

• A married couple (with two children) where the principal earns 100% of the average wage and the second earner starts working at 100% of the average wage.

Assumptions and limitations

The tax wedge of the second earner measures the additional tax burden borne by the household relative to the increase in household income when the second earner enters employment. The indicator was first introduced in the Special Feature for the 2016 edition of Taxing Wages. There are two main assumptions concerning the tax wedge of the second earner as shown in this chapter:9

1. The decision of the second earner to enter the workforce is subsequent to the primary earner’s decision to participate.

2. The decision of the second earner to enter the workforce is made at the household level rather than at the individual level (for additional details, please see Box 2.1 below).10

Moreover, all the results shown in this chapter are derived from the Taxing Wages models and are thus subject to the same assumptions (including those on the industrial sectors taken into consideration for the wage estimates) that apply to these.

The indicators above are calculated in the same way regardless of whether couples are taxed on an individual or joint basis. Annex Table 2.A.1 provides a classification of the tax systems in place among OECD countries in 2023 on the basis of their tax unit.11 Twenty-nine countries had an individual-based tax system, while nine countries (France, Germany, Ireland, Luxembourg, Poland, Portugal, Spain, Switzerland and the United States) either had a joint tax system or allowed couples to choose between the two approaches.

For the countries that allow citizens to choose how to be taxed (Germany, Ireland, Portugal, Spain and the United States), the Taxing Wages methodology assumes the household will adopt the approach that results in the highest post-tax earnings. Most of the 29 countries with individual taxation implement some form of joint assessment for tax reliefs or determine eligibility to certain reliefs according to the structure of the household.12 For this reason, the gap in the tax wedge between second earners and single workers is not limited to countries with joint taxation.

One important limitation of this analysis is that the Taxing Wages methodology is gender-neutral concerning the identity of the two adult partners in a married couple. Hence, the indicators for second earners computed in this chapter are not specifically about the fiscal incentives for married women. The exception is Israel, which is the only country in which the second earner is explicitly assumed to be a woman due to the presence of gender-specific tax reliefs.

When considering the incentives for second earners to take up employment, it is important to note that the Taxing Wages models do not include out-of-work benefits, such as unemployment benefits and guaranteed minimum income schemes. Were these to be included, the tax wedge for a second earner who takes up employment might be higher than the results shown here (Thomas and O’Reilly, 2016[23]).

Meanwhile, the scenario of a second earner earning 67% of the average wage and increasing their salary to 100% of the average wage has been chosen to approximate the situation of a spouse working part-time who moves to full-time employment. However, the Taxing Wages models always assume full-time employment and do not cover specific fiscal provisions in place for part-time workers, nor any benefit or tax relief aimed at part-time workers who move to full-time employment (Harding, Paturot and Simon, 2022[7]).13 The results generated by these models in this respect should therefore be treated with caution.

Box 2.1. Changing the assumptions: An individual-based approach to calculating the second-earner tax wedge

The two central assumptions underpinning the calculation of the tax wedge for second earners in this chapter are that (i) the choice of the second earner to enter the labour market is subsequent to the one of the principal, and (ii) this choice is made at the household level. As a consequence, the analysis does not examine how the tax burden is allocated between the primary and second earner. If the analysis was predicated instead on simultaneous timing of employment decisions and on the individual choice of the second earner (meaning the second earner disregards any change in the primary earner’s tax burden), the results would change significantly for almost all countries, in particular for those with household-level taxation systems.

With this alternative set of assumptions, it would be more appropriate to consider the tax burden on the second earner rather than changes in the household’s tax burden. In the case of an individual-based tax system, the calculation of the tax burden faced by the second earner under this alternative approach would remain straightforward: the tax burden (including SSCs) imposed on the second earner would be divided by the second earner’s income (plus employer SSCs). This means that the loss by the primary earner of, for example, a dependent spouse allowance or tax credit would not be considered in the calculation of the second earner’s tax wedge. As a result, the second-earner average tax wedge would tend to be lower than that calculated under the paper’s current methodology for countries with such provisions. Consistent with this approach, the primary earner’s average tax wedge would increase when the second earner enters employment.

Under household-based taxation, the calculation of the second earner’s individual tax burden would become more complicated because the increase in the tax burden would be legally attributable to the household rather than to either spouse. Calculating a second earner’s average tax wedge would therefore require the household income to be ‘distributed’ among household members. The income allocated to the second earner would then be used for the tax wedge calculations. If household income is assumed to be shared equally, this approach results in the average income tax rate of the entire household being applied to the second earner.

As an example, in Germany married couples can choose to be taxed jointly under an income-splitting system (Ehegattensplitting), which assumes that household income is shared equally within the couple. The taxable incomes of the spouses are calculated individually and then summed up (specific allowances are doubled), with the resulting amount divided by two. The tax rate is applied to this average household tax base, and finally the tax liability is calculated by doubling the result obtained.

The average and marginal tax rates are therefore identical for the principal and second earner under German’s income-splitting system. At the same time, this approach would result in lower tax burdens for the second earner than are shown in this chapter. For example, a second earner without children earning 100% of the average wage faces an average tax wedge of 54.1% on entering employment under the assumptions and calculations used in this paper (Figure 2.3. Panel B) while the splitting method would result in a tax wedge of 47.9% for the second earner – around 6.2 p.p. lower. The tax wedge for the other cases would be the same as those presented in Chapter 1 of this report.

The average tax wedge on second earners

This section examines the average tax wedge on second earners in OECD countries, thereby shedding light on the fiscal incentives facing this cohort when deciding whether to take up work. It compares the tax wedge for second earners at different income levels, with and without children, with that of a single worker earning the same amount and with the same number of children. It then decomposes the second-earner tax wedge to demonstrate the relative importance of personal income tax, SSCs (employee and employer) and cash benefits. Lastly, it compares the second-earner tax wedge in 2023 with results for 2014 to see how the indicator has changed over the past decade.

Second-earner versus single-earner tax wedge

Figure 2.3 compares the average tax wedge of the second earner and the tax wedge of a single worker at two different earnings levels, for households without and with children, in 2023. This indicator shows what the tax wedge would be for a second earner who takes up work at these different earnings levels.

Panel A focuses on a second earner at 67% of the average wage in a two-earner household, whose tax wedge it compares to that of a single worker earning 67% of the average wage (in both cases, without children). On average, the tax wedge was higher for the second earner in almost all countries in 2023, with an OECD average for the second earner of 34.0% versus an average of 31.0% for the single earner. Only Israel had a higher tax wedge for the single earner, due to gender-specific tax reliefs that are available to the second earner.14

The average tax wedge for the second earner was the same as that of the single worker at the same wage level in 13 countries: Australia, Colombia, Costa Rica, Finland, Hungary, Latvia, Lithuania, Mexico, the Netherlands, New Zealand, Norway, Sweden and Türkiye. These countries tax on an individual basis and do not implement any tax reliefs that are computed at the household level in the absence of children. For the remaining 25 countries, the difference in the indicator between the second earner and the single worker was due to joint taxation or the existence of tax reliefs determined at the household level.

In 2023, the difference between the tax wedge for the second earner and single worker earning 67% of the average wage was highest in Luxembourg (38%) and was 20% or higher in five further countries (Switzerland, Ireland, Iceland, Belgium and Germany). Aside from the 13 countries where there was no difference because they tax on an individual basis and no tax reliefs are determined at the household level, the smallest differences were in Austria, the United Kingdom, Korea and Greece (all below 5%).

Panel B compares the tax wedge of the second earner with that of a single worker at 100% of the average wage in 2023; as in Panel A, both are assumed to be childless. As is to be expected given the progressivity of tax systems in the OECD, the average tax wedge was higher for both household types due to the higher earnings level. At 37.0% of total labour costs, the tax wedge of the second earner was once again higher than that of the single worker (34.8%).

In 2023, the difference between the tax wedge of the second earner and that of the single worker was smaller on average when they were both working at 100% of the average wage than when they were working at 67% thereof (8.9% versus the 14.3% mentioned above). The difference only exceeded 20% in two countries: Switzerland (29.4%) and Luxembourg (20.8%); it was below 5% in seven countries (not including the 13 countries with no tax relief at the household level mentioned above).

This smaller difference in the tax wedge between the two categories of worker at a higher income level exists due to there being a lower amount of tax reliefs that the household would lose in the event that the second earner starts working. A single earner at 100% of the average wage is mostly ineligible for tax reliefs in OECD countries; the relative disadvantage of a second earner at the same earnings level is therefore smaller, as they miss out on fewer incentives by being taxed as part of a household. In OECD countries, a single worker earning 67% of the average wage tends to benefit from a number of policies to reduce effective tax rates that are not available to second earners.

Panel C shows how the tax wedge for the second earner changes when there are children in the household. On average, the tax wedge of second earners for these households is higher than for second earners without children shown in Panels A and B. For a second earner with children taking up work at 67% of the average wage, the average tax wedge was 35.2% in 2023 (versus 34.0% for the second earner without children), while at 100% of the average wage it was 37.9% (versus 37.0% for the second earner without children). The higher tax wedge for second earners with children relative to those without children reflects the loss or reduction of means-tested cash transfers and family-related tax reliefs targeted at families with children when the spouse starts working.

This analysis does not compare the results for married couples with children with those of a single worker with children at the same income level because single parents are typically eligible for a wide range of tax reliefs and cash transfers that limit the comparability between their situation and that of a second earner. To illustrate this point, Annex Figure 2.A.2 shows the tax wedge of a single parent with two children working at 67% of the average wage and a single parent with two children working at 100% of the average wage. It should be noted that there are significant differences in the tax wedge between second earners and single workers with children even in countries with individual taxation because cash benefits payable to single parents are subject to different rules and eligibility criteria relative to the taxation of income.

While the previous analysis focuses on couples where the principal earner is employed at 100% of the average wage, Annex Figure 2.A.3 shows the tax wedge for the second earner when the principal works at 167% of the average wage to simulate a high-earning scenario. For households without children, the results are similar to those shown in Figure 2.3. The average tax wedge of the second earner is slightly higher if they take up employment at 67% of the average wage when their spouse earns 167% of the average wage (35.0% versus 34.0% in Panel A of Figure 2.3), as well as when the second earner starts working at 100% of the average wage (37.8% versus 37.0% in Panel B of Figure 2.3).

For households with two children, the tax wedge for a second earner working at 67% of the average wage when the principal earns 167% of the average wage is 34.8%, which is slightly lower than when the principal works at 100% of the average wage (35.2%). The tax wedge for the second earner with two children at 100% of the average wage is virtually the same regardless of the earnings of the principal (37.7% and 37.8%, respectively). Hence, the tax wedge is lower for a second earner (especially at low-earnings levels) when the principal is a high earner because the principal had already exhausted most of the means-tested reliefs or transfers to which the household was eligible before the second earner decided to start work. As a result, the second earner faces a slightly smaller fiscal disincentive to starting work.

Figure 2.3. Tax wedge of the second earner and a single earner at the same earnings level, 2023

Note: The principal earner in the two-earner married couple always works at 100% of the average wage (AW).

Source: Country submissions, (OECD, 2023[28]) Economic Outlook Volume 2023 Issue 2.

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The net personal average tax rate, another standard Taxing Wages indicator, has also been calculated as part of this study. The results are shown in Annex Figure 2.A.1, which shows the results for the net personal average tax rate of a second earner commencing work at 67% and 100% of the average wage. This indicator is lower than the average tax wedge for all household types, as it does not include employer SSCs or payroll taxes. Outside countries with individual taxation, the net personal average tax rate for households without children and regardless of earnings level is larger for second earners than for single workers at the same earnings level (Panels A and B). For households with or without children, the indicator is usually larger when the second earner commences work at 100% of the average wage than when they do so at 67% of the average wage. This is in line with the findings for the tax wedge of the second earner discussed above.

Decomposing the second-earner tax wedge

Figure 2.4 shows the decomposition of the second-earner tax wedge across OECD countries in 2023 for the four household types between income tax, employee SSCs, employer SSCs and cash transfers. The principal earner in the couple is assumed to be working at 100% of the average wage.

Panels A and B show that the average tax wedge of second earners (without children) who take up work is mainly composed of employer SSCs and income taxes. On average, employer SSCs accounted for 39.1% of the tax wedge at 67% of the average wage and for 36.2% of the tax wedge at 100% of the average wage in 2023. Income tax accounted for 37.1% of the tax wedge at 67% of the average wage and 41.9% at 100% thereof. Employee SSCs accounted for 23.8% of the second-earner tax wedge at 67% of the average and 21.9% at 100% of the average wage. At both income levels, the cash benefits included in the Taxing Wages models accounted for a minimal proportion of the tax wedge.

Panels A and B also show the decomposition of the tax wedge for a single worker at the same levels of income (denoted ‘OECD-Single’). On average across the OECD, for a single worker earning 67% of the average wage, employer SSCs accounted for 42.9% of the tax wedge in 2023, while income taxes accounted for 31.9% and employee SSCs for 26.1%. When considering a single worker earning 100% of the average wage, there was little difference between the relative share of employer SSCs and income taxes in 2023 (38.4% and 38.3% of the tax wedge, respectively), while employee SSCs accounted for 23.3%.

Panels C and D show the composition of the second-earner tax wedge in households with two children. For this group, the tax wedge includes the loss of child benefits when second earners take up employment at each income level. At 67% of the average wage, cash transfers accounted for 4.3% of the tax wedge in 2023, while they accounted for 3.1% of the tax wedge at 100% of the average wage. Income tax accounted for 35.3% of the tax wedge at 67% of the average wage and 40.3% at 100% of the average wage, while employer SSCs accounted for 37.8% and 35.4% of the tax wedge at 67% and 100% of the average wage respectively.

Figure 2.4. Decomposition of the tax wedge of second earners, 2023

Note: The principal earner in the two-earner married couple always works at 100% of the average wage. The label “OECD-Single” refers to the OECD average for the single worker earning the same percentage of the average wage as the second earner in the married couple. It is only displayed in Panels A and B.

Source: Country submissions, (OECD, 2023[28]) Economic Outlook Volume 2023 Issue 2.

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Figure 2.5 shows how the second-earner tax wedge changed between 2014 (the year analysed in the previous Special Feature on this topic) and 2023, indicating both the size and composition of these changes. It also shows how the tax wedge of the equivalent single earner changed over the same period.

Between 2014 and 2023, the average second-earner tax wedge decreased slightly for all household types included in the analysis. For a second earner without children, the tax wedge declined in 24 out of 38 countries at both 67% and 100% of the average wage, while for a second earner with two children it declined in 28 countries and 25 countries at 67% and 100% of the average wage, respectively. Although the analysis has not been repeated for this chapter, the special feature in Taxing Wages 2016 showed that the tax wedge of second earners earning 67% of the average wage increased for a majority of countries between 2010 and 2014.

The decreases in the tax wedge between 2014 and 2023 tended to be larger for households with children and for households where the second earner earns 67% of the average wage. On average across OECD countries, the declines in the tax wedge amounted to -1.2 p.p. and -0.7 p.p. for a second earner without children who takes up employment at 67% (Panel A) and 100% of the average wage (Panel B) respectively. For a second earner with two children, the tax wedge at 67% of the average wage declined by -1.4 p.p. (Panel C) and by -0.9 p.p. at 100% of the average wage (Panel D).

For second earners without children, there were especially large declines in Czechia, Estonia, Hungary and the Netherlands, where the tax wedge fell by at least 5 p.p. for at least one of the household types. These declines are consistent with changes in the tax wedge for equivalent single earners in these countries over the same period. For a second earner with two children taking up work at 67% of the average wage, there were declines of at least 5 p.p. in Estonia, France, Hungary and Italy; for the latter two countries, the decline also exceeded 5 p.p. at 100% of the average wage. For Estonia, the large decrease in the tax wedge for low-earning second earners (both with and without children) is attributable to a shift from joint to individual taxation from 2017 onwards, which caused a fall in the income tax component.

In most countries, income tax was the main driver of changes in the second-earner tax wedge over this period across the household types under analysis, although this was not the case in the Netherlands (where employee SSCs was primarily responsible for the change), Hungary, France (employer SSCs in both cases), or Italy (cash transfers) among the countries with the largest changes noted above.

In some countries, the difference in the tax wedge between 2014 and 2023 resulted from changes in multiple components, not always in the same direction. In Lithuania, for example, a social security reform in 2019 altered the composition of the tax wedge, whereby income taxes and employee SSCs replaced employer SSCs as the main components of the tax wedge. For a second earner without children, the tax wedge declined across household types in France and Greece despite an increase in the income tax wedge due to reductions in employer and employee SSCs, while the tax wedge increased in Finland as declines in income tax and employer SSCs were offset by an increase in employee SSCs.

The decline in the tax wedge for second earners without children between 2014 and 2023 was slightly larger than the decline in the tax wedge for a single worker without children. At 67% of the average wage, the OECD average tax wedge for a single worker decreased by -0.8 p.p. over this period (versus -1.2 p.p. for the second earner) while it fell by -0.4 p.p. at 100% of the average wage (versus -0.7 p.p. for the second earner). Comparison between second earners and single workers with children is not included due to the significant differences in the tax wedge for single parents, as mentioned above.

Figure 2.5. Changes in the tax wedge of the second earner between 2014 and 2023

Note: The principal earner in the two-earner married couple always works at 100% of the average wage (AW). The label “OECD-Single” refers to the OECD average for the single worker earning the same percentage of the average wage as the second earner in the married couple. It is only displayed in Panels A and B.

Source: Country submissions, (OECD, 2023[28]) Economic Outlook Volume 2023 Issue 2.

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Marginal tax wedge on second earners

This section examines the marginal tax wedge faced by second earners to analyse their incentive to increase the amount they work. It does so with reference to two indicators that are not standard to Taxing Wages but rather have been calculated specifically to investigate this topic: the change in the tax wedge when the wage of the second earner increases (i) by 1% of the average wage and (ii) from 67% to 100% of the average wage. Results are compared with the marginal tax wedge of a single earner, as in previous sections.

Marginal tax wedge for a wage increase equivalent to 1% of the average wage

Figure 2.6 provides insights into the intensive margins of the labour supply by examining the marginal tax wedge for an increase in earnings amounting to 1% of the average wage for second earners in married couples where the principal earns 100% of the average wage. This scenario is intended to capture the impact of a small rise in a second earner’s wage, an increase that is unlikely to move them into a higher tax bracket.

Panels A and B show employed second earners in households without children, whose marginal tax wedge (earning 67% and 100% of the average wage in Panels A and B, respectively) it compares with the marginal tax wedge of a single worker at the same wage.

These panels show that this measure of the marginal tax wedge was very similar between the second earner and the single worker at the same wage level in 2023, although the average value for the single worker was slightly smaller. When working at 67% of the average wage, the average marginal tax wedge of a second earner and of a single worker across OECD countries were 42.6% and 42.4% respectively. When they earned 100% of the average wage, the average marginal tax wedge of the second earner and single earner were 43.4% and 43.2%, respectively.

For earnings at 67% of the average wage, the difference in the marginal tax wedge for the second earner and that of the single worker only exceeded 0.1 p.p. in Germany, Luxembourg and Switzerland, while for earnings at 100% of the average wage, this occurred only in Switzerland.15 All these countries are characterised by joint taxation.

The only countries where the marginal tax wedge was smaller for the second earner than for a single worker were France (due to the fiscal relief for married households) in Panel A and Belgium (due to the differential schedule for single workers and couples respectively as concerns the special social security contribution) in Panel B.

While the marginal tax wedge for the second earner was higher at 100% of the average wage than at 67% thereof on average across the OECD, this was not the case for Belgium, Canada, France, Germany, Lithuania or Spain, where second earners at 100% of the average wage faced a lower marginal effective tax rate than those at 67% of the average wage.16

Panel C compares the marginal tax wedge of a spouse earning 67% of the average wage and a spouse earning 100% of the average wage in 2023, assuming that the households include two children. As with previous parts of this analysis, there is no comparison with a single worker earning the same amount because single parents benefit from specific fiscal regimes that make the comparison less meaningful.

The marginal tax wedge of the second earner for an increase in earnings of 1% of the average wage was almost the same for the households with children (42.5% at 67% of the average wage and 43.4% at 100% of the average wage on average across the OECD) as for childless couples discussed above. In this case, an increase in earnings equivalent to 1% of the average wage does not significantly affect the means testing of transfers or reliefs for households with children, contributing to the similar results observed for childless households.

Figure 2.6. Marginal tax wedge of the spouse when increasing earnings by 1% of the average wage, 2023

Note: The principal earner in the two-earner married couple always works at 100% of the average wage (AW).

Source: Country submissions, (OECD, 2023[28]) Economic Outlook Volume 2023 Issue 2.

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Marginal tax wedge for an increase in earnings from 67% to 100% of the average wage

This sub-section examines how labour taxation may affect labour supply at the intensive margin by examining the marginal tax wedge for a more substantial increase in earnings. Figure 2.7 compares the marginal tax wedge of a second earner working at 67% of the average wage who increases their earnings to 100% of the average wage to that of a single worker undergoing the same change in earnings. Panel B displays the marginal tax wedge of a second earner undergoing the same change in earnings while assuming that there are two children in the household. As for the previous analysis, the principal in the married couple is assumed to be employed at 100% of the average wage.

The case of the second earner (or single worker) employed at 67% of the average wage who increases their earnings to 100% of the average wage is chosen to proxy the situation of a part-time worker moving to full-time. However, it is important to note that the Taxing Wages model assumes full-time employment; the results should therefore be treated with caution since they do not consider specific provisions that may exist for part-time workers.17

For households without children shown in Panel A, the marginal tax wedge of the second earner was slightly higher than that of a single worker in 2023 (43.0% vs. 42.7% on average). Consistent with the findings shown in Figure 2.6, most of the countries that display a higher marginal tax wedge for second earner are characterised by joint taxation (Finland, France, Germany, Portugal, Switzerland and the United States). When there are two children in the household (Panel B), the marginal tax wedge for the second earner was slightly higher, at 43.2% on average. The small increase in the marginal tax wedge for the spouse in the household with two children is attributable to the loss of means-tested tax reliefs and cash transfers due to the spouse’s increase in earnings.

Figure 2.7. Comparison of the marginal tax wedge of a second earner and of a single worker increasing their wage from 67% to 100% of the average wage, 2023.

Note: The principal earner in the two-earner married couple is assumed to work at 100% of the AW.

Source: Country submissions, (OECD, 2023[28]) Economic Outlook Volume 2023 Issue 2.

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Conclusion

This Special Feature uses Taxing Wages models for 2023 to analyse the tax wedge on second earners to shed light on one channel through which labour taxation may affect women’s incentives to increase their participation in the labour market. These findings may in turn inform policies to close persistent gaps between male and female labour outcomes, thereby demonstrating the capacity for tax policy to enhance gender equality across OECD countries (OECD, 2022[29]).

The chapter focuses on two primary indicators, the average tax wedge and the marginal tax wedge, which are shown for second earners at different earnings levels and in households with and without children. The average tax wedge shows the effective tax rates on a second earner who takes up work (an increase in labour supply at the extensive margin), while the marginal tax wedge shows the effective tax rates on a second earner’s additional earnings as a proxy for an increase in labour supply at the intensive margin.

While the average tax wedge is a standard Taxing Wages indicator, the two variants of the marginal tax wedge in this chapter have been calculated specifically for this analysis. For households without children, indicators for second earners are compared with results for single earners to examine whether second earners face higher effective tax rates than if they were single. Major differences in the level and composition of the tax wedge for single parents prevent meaningful comparison with second earners with children.

The results show that the average tax wedge for second earners was higher than for single workers in a majority of OECD countries and on average across the OECD in 2023. The differences were mainly due to joint taxation or the presence of tax reliefs (either allowances or credits) that were only available to one spouse or depended on joint earnings. The results also show that the average tax wedge was higher for a second earner who starts work at 100% of the average wage than at 67% thereof, as a result of progressivity of tax systems in the OECD. The average tax wedge was shown to be slightly higher for second earners with children than for those without children.

On average across the OECD, employer SSCs and income taxes are the largest components of the tax wedge on second earners. The loss of child benefits contributes to the tax wedge for second earners with children who take up employment. For around two-thirds of OECD countries, the average tax wedge on second workers decreased between 2014 and 2023 for the different households analysed, in most cases due to lower income taxes. The difference between the average tax wedge of the childless second earner and that of an equivalent single earner also narrowed slightly over this period. A possible avenue for future analysis may be to examine in greater detail the factors behind the decline in the average tax wedge for second earners across OECD countries.

The two new indicators developed to examine the marginal tax wedge on second earners measure (in the first instance) the effective tax rates on additional earnings equivalent to 1% of the average wage and (in the second instance) an increase in earnings from 67% to 100% of the average wage. The results show that there is only a small difference between the marginal tax wedge for second earners and for single earners (in both cases, without children). These differences are mostly driven by countries with joint taxation. Analysis of the second indicator of the marginal tax wedge could be enhanced by examining whether it would also be affected by the loss of specific tax measures for part-time workers, given that the move from 67% to 100% of the average wage may be considered a proxy for a shift from part-time to full-time work.

References

[4] André, C. et al. (2023), “Promoting gender equality to strengthen economic growth and resilience”, OECD Economics Department Working Papers, No. 1776, OECD Publishing, Paris, https://doi.org/10.1787/54090c29-en.

[10] Angelov, N., P. Johansson and E. Lindahl (2016), “Parenthood and the Gender Gap in Pay”, Journal of Labor Economics, Vol. 34/3, pp. 545-579.

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[11] Bertrand, M., C. Goldin and L. Katz (2010), “Dynamics of the gender gap for young professionals in the financial and corporate sectors”, American economic journal: applied economics, Vol. 2(3), pp. 228-255.

[17] Bick, A. and N. Fuchs-Schündeln (2018), “Taxation and labour supply of married couples across countries: A macroeconomic analysis”, The Review of Economic Studies, Vol. 85.3, pp. 1543-1576, https://doi.org/10.1093/restud/rdx057.

[27] Bierbrauer, F. et al. (2023), “The taxation of couples”.

[21] Bundesministerium der Finanzen (2024), Sechster Bericht zur Tragfähigkeit der öffentlichen Finanzen.

[25] Carbonnier, C. (2021), “Family-Based Tax and Transfer System – Issues for Income Tax and Other Public Policies”, Economie et Statistique / Economics and Statistics, Vol. 526-527, pp. 41-48, https://doi.org/10.24187/ecostat.2021.526d.2051.

[18] Chen, Q. et al. (2023), The Role of Structural Fiscal Policy on Female Labor Force Participation in OECD Countries, International Monetary Fund.

[15] CPB (2015), Study on the effects and incidence of labour taxation, European Union, https://doi.org/10.2778/88441.

[9] European Union (2023), Employment and Social Developments in Europe: Addressing labour shortages and skills gaps in the EU, European Union, https://ec.europa.eu/social/BlobServlet?docId=26989&langId=en.

[7] Harding, M., D. Paturot and H. Simon (2022), Taxation of part-time work in the OECD, OECD Publishing, Paris, https://doi.org/10.1787/572b72d3-en.

[20] Kaygusuz, R. (2010), “Taxes and female labor supply”, Review of Economic Dynamics, Vol. 13.4, pp. 725-741.

[14] Keane, M. (2022), “Recent research on labor supply: Implications for tax and transfer policy”, Labour Economics, Vol. 77/August 2022, https://doi.org/10.1016/j.labeco.2021.102026.

[22] Mastrogiacomo, M. et al. (2017), “Heterogeneity in Labour Supply Responses: Evidence from a Major Tax Reform”, Oxford Bulletin of Economics and Statistics, Vol. 79/5, pp. 769-796, https://doi.org/10.1111/obes.12168.

[24] Myohl, N. (2023), “Till taxes keep us apart? The impact of the marriage tax on the marriage rate”, International Tax and Public Finance, pp. 1-41.

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[28] OECD (2023), OECD Economic Outlook, Volume 2023 Issue 2, OECD Publishing, Paris, https://doi.org/10.1787/7a5f73ce-en.

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[12] OECD (2023), SIGI 2023 Global Report: Gender Equality in Times of Crisis, Social Institutions and Gender Index, OECD Publishing, Paris, https://doi.org/10.1787/4607b7c7-en.

[29] OECD (2022), Tax Policy and Gender Equality: A Stocktake of Country Approaches, OECD Publishing, Paris, https://doi.org/10.1787/b8177aea-en.

[5] OECD (2021), The Role of Firms in Wage Inequality: Policy Lessons from a Large Scale Cross-Country Study, OECD Publishing, Paris, https://doi.org/10.1787/7d9b2208-en.

[6] OECD (2021), Towards Improved Retirement Savings Outcomes for Women, OECD Publishing, Paris, https://doi.org/10.1787/f7b48808-en.

[2] OECD (2016), Taxing Wages 2016, OECD Publishing, Paris, https://doi.org/10.1787/tax_wages-2016-en.

[8] Queisser, M. (2021), “COVID-19 and OECD Labour Markets: What Impact on Gender Gaps?”, Intereconomics, Vol. 56/5, pp. 249-253, https://doi.org/10.1007/s10272-021-0993-6.

[26] Schechtl, M. (2021), “The Taxation of Families: How Gendered (De)Familialization Tax Policies Modify Horizontal Income Inequality”, Journal of Social Policy, Vol. 52/1, January 2023, pp. 63 - 84, https://doi.org/10.1017/S0047279421000404.

[19] Selin, H. (2014), “The rise in female employment and the role of tax incentives. An empirical analysis of the Swedish individual tax reform of 1971”, International Tax and Public Finance, Vol. 21, pp. 894-922.

[23] Thomas, A. and P. O’Reilly (2016), “The impact of tax and benefit systems on the workforce participation incentives of women” OECD Taxation Working Papers No. 29, https://doi.org/10.1787/d950acfc-en.

[3] World Bank (2024), Women, Business and the Law 2024, Washington, DC: World Bank, https://doi.org/10.1596/978-1-4648-2063-2.

Annex Table 2.A.1. Classification of OECD countries’ tax systems (as of 2023)

	Tax unit	Tax reliefs
Australia	Individual	Individual
Austria	Individual	Mixed
Belgium	Individual	Household
Canada	Individual	Mixed
Chile	Individual	Mixed
Colombia	Individual	Mixed
Costa Rica	Individual	Mixed
Czechia	Individual	Mixed
Denmark	Individual	Mixed
Estonia	Individual	Mixed
Finland	Individual	Individual
France	Joint	Mixed
Germany	Optional (Taxing Wages computations assume Joint)	Household
Greece*	Individual	Individual
Hungary	Individual	Individual
Iceland	Individual	Mixed
Ireland	Optional (Taxing Wages computations assume Joint)	Mixed
Israel	Individual	Individual (albeit tax credits are linked to the composition of the household)
Italy	Individual	Mixed
Japan	Individual	Mixed
Korea	Individual	Mixed
Latvia	Individual	Mixed
Lithuania	Individual	Individual
Luxembourg	Joint	Mixed
Mexico	Individual	Individual
Netherlands	Individual	Mixed
New Zealand	Individual	Individual
Norway	Individual	Mixed
Poland	Joint	Household
Portugal	Optional (Taxing Wages uses the most beneficial approach at the household level)	Mixed
Slovak Republic	Individual	Mixed
Slovenia	Individual	Mixed
Spain	Optional (Taxing Wages uses the most beneficial approach at the household level)	Mixed
Sweden	Individual	Individual
Switzerland	Joint	Household
Türkiye	Individual	Individual
United Kingdom	Individual	Mixed
United States	Optional (Taxing Wages computations assume Joint)	Household

Note: For the column “Tax unit”, “Individual” refers to countries where the tax unit is the individual while “Joint” refers to countries where couples are assessed jointly. For the column “Tax reliefs”, “Individual” indicates that all tax reliefs are computed independently for the principal and the second earner; “Mixed” indicates that at least some reliefs are computed at the household level or are only attributed to one of the two members of the couple; and “Household” indicates that all reliefs are computed jointly at the household level. This classification of tax systems focuses on how personal income taxes are computed. Employee and employer social security contributions are almost always determined at the individual level, while cash transfers (where present) are generally computed at the household level by considering a household’s overall resources. In Greece, couples file their returns jointly but the respective spouses’ tax liabilities are computed on individual earnings.

Source: Country submissions.

Annex Figure 2.A.1. Net personal average tax rate of the second earner and a single earner at the same earnings level, 2023

Note: The principal earner in the two-earner married couple always works at 100% of the average wage (AW).

Source: Country submissions, (OECD, 2023[28]) Economic Outlook Volume 2023 Issue 2.

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Annex Figure 2.A.2. Tax wedge for a single parent with two children, 2023

Single parent with two children working at 67% and 100% of the average wage

Source: Country submissions, (OECD, 2023[28]) Economic Outlook Volume 2023 Issue 2.

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Annex Figure 2.A.3. Tax wedge of second earner with a high-earning principal, 2023

Note: The principal earner in the two-earner married couple always works at 167% of the average wage (AW).

Source: Country submissions, (OECD, 2023[28]) Economic Outlook Volume 2023 Issue 2.

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Notes

← 1.  The headline objective of SDG 5 is ‘Achieve gender equality and empower all women and girls.’ Gender equality also features in SDGs related to education (SDG 4) and inequality (SDG 10).

← 2.  For a fuller examination of this topic, please see (Schechtl, 2021[26]) and (Bierbrauer et al., 2023[27]).

← 3.  In Germany, for example, married couples are legally obliged to maintain their spouse. The impact of this obligation on the ability-to-pay of whichever spouse is liable for maintenance is commonly not reflected in the progressive individual income tax schedule and could lead to horizontal inequalities between a married couple with a dependent partner and two unmarried individuals with the same overall income.

← 4.  The (average) tax wedge is computed only for the whole household or for one of the two members when they pick up employment. Hence, the tax wedge for the primary earner and the tax wedge for the second earner would be mechanically the same assuming that the other partner is already working at the same earnings level. As concerns the marginal tax wedge, the indicator for the principal and the one for the spouse are the same across all OECD countries when they are working at the same earnings level and are subject to the same change in earnings.

← 5.  The analysis focuses on the tax wedge to convey a complete picture of the effective tax rates on starting work at different earnings levels. This approach is consistent with the previous Special Feature on the topic in 2016 (OECD, 2016[2]).

← 6.  The computation of the tax wedge for the second earner is based on the comparison between two different situations: a one-earner household and a two-earner household. Hence, by design, the indicator should be interpreted as the effective tax burden faced by the second earner when deciding to start working.

← 7.  In the Taxing Wages methodology, cash transfers do not include housing benefits, payments targeted at out-of-work individuals (either unemployment benefits or minimum income schemes) or in-kind benefits. The cash transfers shown in Taxing Wages are generally family benefits linked to the presence of children and universal or means-tested in-work benefits.

← 8.  The results for 2014 included in this report may differ slightly from those included in the Taxing Wages 2016 Special Feature due to revisions and improvements in country-specific computations.

← 9.  Additional detail on what would happen if these two assumptions are relaxed is provided in the Special Feature of the 2016 edition of Taxing Wages (OECD, 2016[2]).

← 10.  This box is based on a box that appeared in the Special Feature of the 2016 edition of Taxing Wages.

← 11.  The classification of tax systems in OECD countries primarily concerns how personal income taxes are computed. Employee and employer SSCs are almost always determined at the individual level, while cash transfers (where present) are generally computed at the household level with reference to a household’s overall resources.

← 12.  Examples of tax reliefs determined at the household level include: tax allowances linked to the presence of a non-working spouse; tax allowances linked to the presence of children that can only be received by one member of the couple (in Taxing Wages, they are assigned to the principal); tax credits computed on the overall earnings of the couple; and tax credits that can be shared between the members of the household if not fully enjoyed by the partner entitled to them.

← 13.  Out of 37 OECD countries (excluding Costa Rica) for which this information is available, there are 16 countries with differential tax treatments for part-time workers, although these differences are typically small. In the cases of Belgium, Colombia, Germany, Italy, Luxembourg, New Zealand, Spain and the United Kingdom, such provisions would fall within the scope of the Taxing Wages model (if part-time workers were considered). In Australia, Austria, Denmark, France, Japan, the Netherlands, Slovenia and the United States, they would fall outside the scope of the model (Harding, Paturot and Simon, 2022[7]).

← 14.  Women were entitled to an additional credit of ISL 1 410 with respect to men in 2023, and working mothers (or single parents regardless of their gender) were entitled to an additional amount of child tax credit of ISL 2 820 compared to working fathers with a spouse.

← 15.  The difference between the marginal tax wedge for the second earner and for the single worker both without children was only 0.04 p.p. in Belgium for the case of individuals working at 67% of the average wage.

← 16.  In Germany, second earners at 100% of the average wage faced a lower marginal effective tax rate than those at 67% of the average wage because, at an income of 100% of the average wage, the contribution assessment ceiling for health and long-term care insurance was exceeded, whereas at an income of 67% of the average wage it was not.

← 17.  This analysis is carried out in (Harding, Paturot and Simon, 2022[7]).