Marriage-related taxes, social security benefits, and women’s labour supply in the us vox, cepr pol

Marriage-related taxes and Social Security benefits are holding back women’s labour supply in america

In america, both taxes and social security benefits depend on one’s marital status and have a tendency to discourage the labour way to obtain the secondary earner. Using information on US cohorts born in 1945 and 1955, this column implies that eliminating marriage-related provisions drastically escalates the participation of married women over their life time cycle and reduces the participation of married men after age 60. If the resulting government surplus were used to lessen income taxation, there will be large welfare gains for almost all the population.


After increasing robustly from 1962 to the first 1990s, the labour force participation of ladies in the united states has been stagnating (Figure 1). Black et al. (2017) write: “THE UNITED STATES economy won’t operate at its full potential unless government and employers remove impediments to full participation by ladies in the labor market. The failure to handle structural problems in labor markets – including tax and employment policy – does a lot more than restrain women’s careers and aspirations for an improved life. Actually, barriers to participation by women also become brakes on the national economy, stifling the economy’s capability to fully apply the talents of 51 percent of the populace.”

Figure 1 Labour force participation rate of women aged 16 and older in america

Source: Bureau of Labour Statistics from the existing Population Survey

In america, taxes and old-age Social Security benefits depend on one’s marital status and have a tendency to discourage the labour way to obtain the secondary earner. Lower wages indicate these secondary earners have historically been women.

The disincentives from joint taxation arise because couples file taxes jointly and taxation is progressive. Because of this, secondary earners face an increased marginal tax rate, which discourages their labour supply. The reason being the marginal tax rate (i.e. the tax rate put on yet another dollar of income, computed at different income levels) is an extremely important determinant in your choice to come back to working.

The disincentives to work linked to Social Security benefits stem from the actual fact that married and widowed people can claim Social Security spousal and survivorship benefits utilizing their spouses’ past contributions instead of their own. That’s, Social Security benefits for a married person will be the higher between one’s own benefit entitlement and half of the spouse’s entitlement as the other spouse is alive (spousal benefit) and the bigger between one’s own benefit entitlement and the deceased spouse’s following the spouse’s death (survival benefit). Therefore that the low labour way to obtain the secondary earner will not necessarily imply lower Social Security benefits.

In a recently available paper (Borella et al. 2019), we measure these disincentives and estimate a life-cycle model to review the extent to which marriage-based taxes and Social Security benefit rules affect labour supply and savings.

To have a better sense of the magnitude of the disincentives, Figure 2 plots four marginal tax rates as a function of women’s earnings. They make reference to people born in 1945 in twelve months 1988, also to the marginal tax rates of single women and married women with husbands at three different earnings percentiles. For example, an individual woman earning $500 a year faces a marginal tax rate of -10% (also due to the Earned TAX Credit), whereas a married woman earning the same amount faces a marginal tax rate of 14%, 18%, and 21% if she actually is married to a guy in the 25th, 50th, and 75th income percentiles, respectively. This shows that making married people file as single instead of jointly would imply lower marginal tax rates for women and may thus have large incentives regarding their labour market participation.

Figure 2 Marginal tax rate when single (starred red line), married to a guy at the 25th (dashed orange line), 50th (dotted orange line), and 75th (circled orange line) income percentiles, plotted as a function of women’s earnings in 2016 dollars

The left panel of Figure 3 plots Social Security benefits at family members level as the husband is alive. It requires data from married women at retirement and, predicated on the deciles of their own Social Security entitlement, plots their average household yearly Social Security benefits with (circled line) and without (crossed line) marital benefits. For example, the quantity 1 on the horizontal axis represents married women aged 66 inside our 1945 cohort that are in the cheapest decile of their own Social Security contributions. At that decile, household Social Security benefits for all those women and their husbands are $32,000 under marital benefits and $22,000 without marital benefits. A comparison of both lines in this picture reveals that about 50% of married households reap the benefits of Social Security marital benefits while their husband is alive and these benefits can be quite large.

The proper panel of Figure 3 takes data from the same married women and plots what their own yearly Social Security benefits will be after their husband’s death with and without survivor’s benefits. For example, a 66 year-old married woman at the cheapest 10% of Social Security contributions, once a widow, would receive significantly less than $500 a month predicated on her own contributions, whereas she receives $22,000 because of her husband’s contributions and survivorship benefits. The picture demonstrates, as the potential wages of all women are less than men’s, and because women participate less in the labour force and work fewer hours, survivorship benefits are large for over 80% of married ladies in this cohort. This last group of graphs highlights that Social Security marital benefits are large and may also reduce married women’s incentives to work.

Figure 3 Average household Social Security benefits at age 66 by wife’s own Social Security benefit decile, with (dotted blue line) or without (starred red line) marital benefit, in 2016 dollars.

Notes: Left panel: Social Security benefits at family members level as the husband is alive. Right panel: Average survivor benefit by wife’s own Social Security benefit decile, with (dotted blue line) or without (starred red line) marital benefits, 2016 dollars.

To evaluate the result of marriage-related taxes and Social Security benefits on female labour supply, we estimate a rich quantitative lifecycle style of labour supply and savings with single and married individuals who face a possible change in marital status. The model incorporates skill building face to face and includes medical spending and longevity risk. Importantly, our model not merely fits the observed data on labour supply and savings for single and married males and females over the life span cycle, but also implies realistic responses of participation and hours worked in the labour market when net wages change (labour supply elasticities).

Using our model, we find that marriage-based taxes and Social Security benefits strongly reduce female labour supply. The elimination of the marriage-based rules could have raised participation at age 25 by over 20 percentage points for married women and by 5 percentage points for single women. At age 45, participation for these groups could have been, respectively, 15 and 3 percentage points higher without these marriage-related provisions. On the other hand, the elimination of the marriage-based rules would decrease the participation of married men starting at age 60, producing a participation rate that’s 8 percentage points lower by age 65.

We also show that, if the federal government surplus caused by the elimination of marriage-related provisions were used to lessen income taxation, almost all the populace would reap large welfare gains, and the few households that could lose would experience small welfare losses.

These results make reference to the cohort born around 1945. Considering that the labour way to obtain married women has been increasing rapidly as time passes for cohorts born prior to the 1970s, an all natural question that arises is if the ramifications of these marital provisions are also large for younger cohorts where married women will work. To reveal this question, we also study a cohort that’s a decade younger and that we still have a labour market history. Importantly, their labour supply behaviour is fairly similar compared to that of younger cohorts. We find that even for the 1955 birth cohort, the consequences of eliminating marriage-based taxation and Social Security benefits are large. A revenue-neutral reform (that’s, one which reduces the proportional element of the tax to balance the federal government budget, arising from the price savings from the elimination of marital Social Security benefits) will be welfare improving for almost all people in this cohort.


Black, S E, D Whitmore Schanzenbach and A Breitwieser (2017), “The recent decline in women’s work force participation”, in Whitmore Schanzenbach, D and R Nunn (eds), in The 51%: Driving growth through women’s economic participation, Brookings, The Hamilton Project.

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