Social Policy Research Unit financial incentives and mother’s employment: a comparative perspective

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As with (un)employment rates, there are huge variations in marginal tax rates and replacement rates in the 22 countries studied. Countries with low marginal tax rates tend to have high replacement rates and vice versa. The Anglophone countries that perhaps make most fuss about the impact of financial incentives on labour supply have the highest financial incentives to enter or stay in work (low replacement rates), and therefore appear to facilitate mothers’ ability to earn an independent income. However, these countries generally have low incentives for a mother working and earning or earning more (high marginal tax rates). Therefore, whilst facilitating mothers’ employment, these countries do not encourage mothers’ ability to work longer hours or earn an income that is necessarily high enough to live independently.

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