Goodman: How Conservatives Can Erase the Gender Gap

Posted April 15, 2012 at 10:44am

Republicans are waging a “war on women,” some Democrats say. In conjunction with a White House conference on women, the Obama administration is openly courting female voters and portraying the GOP as a party hostile to female interests.

But conservatives are not at war with women. Further, they can erase the gender gap with a set of policy proposals that empower individuals, expand choice and remove ridiculous government regulations.

The most important economic and sociological change in our society in the past 60 years has been the entry of women into the labor market. Despite this, tax law, labor law and a host of other institutions are still built top-to-bottom on the assumption that men will be full time in the labor market, while women will stay in the home.

Consider that:

• When a wife enters the labor market, she is taxed at her husband’s tax rate, even if she earns only the minimum wage. When all taxes and all costs are considered, a second-earner wife in a middle-
income family can expect to keep only about 35 cents out of each dollar she earns.

• If the woman’s husband dies prematurely, Social Security will provide a modest benefit as long as she stays home and takes care of children. But if she works, the combined effect of direct taxes plus loss of benefits will create a marginal tax rate of 75 percent — leaving her with only 25 cents out of each extra dollar she earns.

• Once the widow’s children are grown, Social Security benefits will cease, and she will be on her own to fend for herself; but if she previously responded to the system’s anti-work incentives by remaining out of the labor market, she will now have to enter the market without job skills.

• If the woman goes on welfare, she will confront a newly reformed system that is supposed to encourage work; however, when explicit taxes are combined with loss of benefits, her marginal tax rate will be about 79 percent — leaving her with only 21 cents out of each dollar of wage income.

• When the woman reaches retirement age she will again qualify for Social Security benefits, but if she tries to supplement those benefits with wage income, special taxes on the elderly will make her marginal tax rate 58 percent. Beyond a very modest level of income, she will get to keep only 42 cents out of each extra dollar she earns.

Of course, all of the public policies that burden women also, in principle, burden men. But because of the nature of work and family life, they are much less likely to do so. Here are some other examples:

• Male and female workers pay the same unemployment insurance taxes, but because women are more likely to work part time and because they voluntarily move in and out of the labor market more frequently (to raise children or care for a parent, etc.), they are less likely to receive any benefits in return for the taxes they pay.

• Because Social Security taxes are levied on earnings until capped at a high income level, dual-earner households generally pay much more in taxes than single-earner households, but they will get only a minimal increase in Social Security benefits.

Many changes are needed to bring aging institutions into sync with the way people are living their lives in the 21st century. Here are a few suggestions:

• We need a fairer tax system for two-earner couples, ideally a flat tax.

• We need a flexible employee benefit system that makes it easier for dual-earner couples to obtain higher wages rather than unneeded, duplicate benefits; and for part-time workers to accept lower wages in return for more valuable health and retirement benefits.

• We need flexibility in labor law, making it easier for workers (especially parents with young children) to choose alternatives to the traditional 40-hour work week.

• We need to make health and retirement benefits portable — so that people are not penalized when they switch jobs.

• We need a complete reform of the treatment of spouses under Social Security, as well as reform of the unemployment insurance and our welfare system.

John C. Goodman is president of the National Center for Policy Analysis, research fellow at the Independent Institute and author of the forthcoming book “Priceless: Curing the Healthcare Crisis.” He is widely known as the “Father of Health Savings Accounts,” and Modern Healthcare named him as one of four people who have most influenced the modern health care system.