Monday, 16 August 2010

It's not a bug, it's a feature

Oh dear.

Both Nolan and I worry that the proposed income splitting regime for New Zealand taxation will reduce female labour supply.

Just listened to National Radio's 5 PM news update, and Peter Dunne reckoned that a feature, not a bug.
Mr Dunne says the proposal to allow income splitting could encourage more parents to stay home with their children.

The point is to put women back in the kitchen.

And now he's going on about how important it is for kids to be home with parents rather than in daycare.

The Reserve Bank Annual 2010 was far far too kind to him. I suppose that my understanding of the importance of rice pudding in the economy is insufficient for me to fully appreciate the merits of his position.

Hey, why don't we just set a $50/hr minimum wage for married women so that they're properly unemployable, as they ought to be on a proper progressive understanding of things.


  1. I wish Peter Dunne would limit his social engineering attempts to his own family. It's like he's trying to inflict on us some sort of ghastly real life re-enactment of The Stepford Wives. What's next, special tax arrangements to encourage all those newly virtuous stay-at-home mothers to don burqas?

  2. Tax splitting will reduce the incentive for the lower-earning member of a couple to work. It may come as a shock to you, but this person isn't always a woman.

  3. Meanwhile, back in the real world … this person usually is a woman, and I suspect that if it wasn’t, Peter Dunne would not be proposing income splitting.

  4. @bobux: I didn't mean to limit things. But I think dragonfly's right: Dunne wouldn't be pushing this policy were the aggregate stats reversed.

  5. dragonfly
    I hadn't realised I was living in an unreal world. My wife makes 3x my salary, in part because I've cut back hours to do daycare/school pick-ups. I agree this is atypical, but it is far from unprecedented. And given the increasing gender disparity at university, it will become more and more common.

    Can you back up your psychic-like insight into Dunne's motivation?

    Ditto. Has Dunne briefed you on his kinder und kuche policy, or are you guessing.

  6. 2009 data Household Labour Force Survey. Labour Force Participation Rate.

    Male: Living as married: 80%
    Never married: 67.9%
    Female: Living as married: 66.7%
    Never married: 64.6%

    A much higher proportion of married women are outside of the labour force than are married men. This is so far into "everybody knows this" territory, that it really wasn't worth pointing out in the post. Sure, there are contrary examples. But if we're worried about likely effects, we want to see what averages look like. The average effect of income splitting is to make it less likely that the second earner comes into work and more likely that the second earner leaves work, whether male or female. But more second earners are female than male.

    As for Dunne's motivations, let's put it this way. If Peter Dunne is Revenue Minister some time in the future where we haven't passed income splitting but where the stats on female and male workforce status are reversed, I'll give you 2:1 he's not pushing income splitting. Yup, it's a guess. But it's a guess I'd put money on if the appropriate conditional market existed.