Income inequality within couples and redistribution through the tax-benefit system: the case of the UK Holly Sutherland Institute for Social and Economic Research, University of Essex GeNet conference on Gender Inequalities in the 21st Century 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

6 Composition of couple disposable 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: Jobseekers Allowance (contributory), Industrial Injuries Benefits, Incapacity Benefit, Carers 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

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

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

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

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

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

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

16 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.

17 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?