Work Incentives

I generally love the Economist, for its hard-headed analysis of tough issues, economically liberal philosophy, and crisp writing style. But every now and then, even it says something silly. A recent leader on child care subsidies contained the sentence:

The second bad reason is to get women out to work. The government has been pushing them in that direction for years, and providing child care will give them an extra shove. The government has a clear interest in getting mothers back to work—they will boost economic growth and tax revenue—but families, not governments, should decide whether mothers trade their time with their children for cash.

This final line might make some sense if we lived in a world without taxes. But any tax system inevitably distorts work incentives for parents. For example, the US joint filing system raises the marginal tax rate on secondary earners entering the labour force, while the Australian/UK system of tightly targeted welfare can also create high effective marginal tax rates for secondary earners. So to suggest that there is some "natural" state of the world that should not be tinkered with is just plain silly. Government policy everywhere already affects family labour supply – the question is whether those incentives are best ones for our society.

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1 Response to Work Incentives

  1. Garpet says:

    Would you prefer it if we went back to the 1940’s and 1950’s when a woman’s duty was to procreate in response to the ‘populate or perish’ policy extant at the time?

    This is something that the Treasurer is currently hinting at with his “have one for mum, one for dad and one for the country” exhortation.

    But then again he wants them to work too – interesting conundrum isn’t it?

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