Closing the Workplace Gender Gap . . . By Cutting Taxes?

It has been a fact that in the American labor market there have been far fewer women who have sought work and have found employment than men. According to research, only 59 percent of women who could be in the labor force actually are in the United States, versus 73 percent of men. On the surface, there are a number of reasons why there is such a noticeable gap in the numbers of women actually working or looking for work at all. The well known gender wage gap that exists in the overall labor market tends to keep women on the sidelines, as they know they're not going to get paid as well as their male counterparts. This feedback effect for women in the labor market is a negative to both the women and the labor market itself, as this leads to women often not gaining a lot of human capital to arm themselves to be competitive.

But, an approach to pull some of these women out of the labor force back into the pool of employable workers seems to be an economically sound approach: reducing the tax rates for women as an incentive to gain employment. The theories that are at work behind this proposal tend to support the idea from an economic perspective. Consider the aforementioned wage gap - The proposed idea suggests that taxes for women should be no more than 80% of those for men, which correlates with the current wage gap in the American labor market of women generally making 80 cents per dollar earned by their male counterparts. This would create some sort of net earnings equality effect - women, though grossing less than their male counterparts, would be able to retain a larger percentage of their paychecks to be used for consumption. The working thought is that a larger tax base through more females entering into the labor force would more than compensate for the reduction in the amount charged to each individual female taxpayer.

There are some drawbacks to this proposal, including the possibility that it could backfire if the amount of labor force non-particpation due to pay differences is overestimated. In addition, some economists suggest that women who want to be part of the labor force already are, and the drop in taxes would shrink the tax base while not affecting the labor pool at all. Some others believe that a lower tax burden on working women could be counterproductive to real wages for women, as some employers may cut wages for females to compensate for the lower taxation, hoping to minimize labor costs at the expense of the working woman, further discouraging women in the labor force and those waiting in the wings to start looking for employment.