The Stove Premium

Free Exchange thinks German women should work harder outside the home:

Another interesting aspect of the German economy, and one of its major weaknesses, is often overlooked (though not by Matthew Yglesias)—low participation of (married) women and mothers in the (paid) labour force. There are two economic reasons for this shortfall: taxes and child care.

Germany raises almost 65% of revenues (including social security contributions) through taxes on labour, according to the report, compared to 52% in other OECD countries. The OECD suggests that high taxes on labour might even hinder immigration among highly skilled workers. Henrik Kleven, Camille Landais and Emmanuel Saez recently confirmed this dynamic, in different contexts, in two very interesting papers.

On top of high tax rates, married couples are taxed jointly. In essence, this means that the secondary earner, which is more often than not the wife, faces higher tax rates and has no (additional) personal tax allowance. What’s more, a non-working spouse is covered by the other’s public health insurance in Germany, providing a further disincentive to full-time employment. With the centre-right CDU party in government, however, it is politically very difficult to remove or at least lower these disincentives.

Regarding children, Germany is not stingy. It spends more than the OECD average on policies supporting children, according to a 2009 study. But most of it is spent on direct financial support to parents, and not on child care to enable parents to work full-time. Generous support also hasn’t prevented Germany from having an embarrassingly high child poverty rate (which is nonetheless much lower than America's).

...[I]ncreased efforts to provide easier access to affordable child care have prompted some conservative politicians to demand what the press has termed a “cooker premium”: to pay mothers (or fathers) a compensation if they are not using public child care, but would rather stay at home. This premium, which works as a disincentive or an implicit tax on labour, is scheduled to come into force in 2013 as well (though within the governing coalition there is still plenty of argument the rule).

Hmm, I'd call it the 'stove premium', but that may be an Americanism. To be fair, Free Exchange limits itself to 'economic' reasons for German womens' relatively low labor participation rate. But let's not forget cultural factors: plenty of German women believe that it's a good thing to spend lots of time with their children, and are willing to sacrifice career advancement and extra earnings to do that. What if they're right?

Comments

[sakasiru]

I think it is a nice thing to be able to stay at home with the kids. The problem is, that there always should be a choice. I gave up working because there simply was no other way. Kinderkrippen were (and still are) too sparse to give every woman who wants to work a place for their child, and are often not covering all working hours. So if you want to work, you'll have to work half-days, so you get paid half, and you will pay half of that again right back in taxes. What's left makes you think really hard if it's worth the trouble of bringing your kid to day care, go working, running back to get your kid before day care closes and caring the other half of the day for your kid yourself.
The signal the gouvernment sends with the tax system and the other payments instead of enhancing the day care system only adds to the feeling that they want to keep their unemployment rates low by artificially pulling a lot of women out of the statistics.

[Jens-Olaf]

I am not sure about the taxes on working couples when one spouse earns less than the other nowadays. But many wifes working full time earned "netto" almoust only half the "brutto" income years ago. A few hundred Euros monthly for a tiring full time job.

[N]

Germany is right in the middle of all OECD countries in terms of working women. And the wage gap is slightly higher than in the rest of the EU, but on the same level as UK.

I totally side with Detlef.

And Martin has a good point too: As a PhD with lots of friends having PhDs too, I rather see the tendency to postpone having kids and concentrate on the career.

I am sorry to say that the picture of the modern german women as given in the article above is not accurate and heavily influenced by stereotypes of Germans.

[ALEXIA]

About "The Stove Premium" whatever issue you shred here seems to me pretty outstanding. I would like to appreciate this post view as well. Thanks mate.

[Detlef]

The low access to childcare is a disgrace. But I found the following sentence somewhat chilling:

What’s more, a non-working spouse is covered by the other’s public health insurance in Germany, providing a further disincentive to full-time employment.

Essentially, remove their health insurance so that they are forced to work full-time. And of course forcing additional people to look for work will have the nice side effect to put additional pressure on wages...

[Jerry]

There is still a large gap between east and west about this, not only in access to child care institutions, but in mentality towards them as well. Kindergarten and Kinderkrippe, while regarded as a good possibility for young children to learn social skills and spend time among peers in the east, are seen as cruel storage units and a parental irresponsibility to make use of them among westerners ("Rabeneltern").
Therefor, you won't find understanding for parents, who are out of work but send their children to Kindergarten anyhow among the latter.

[Martin]

But let's not forget cultural factors: plenty of German women believe that it's a good thing to spend lots of time with their children, and are willing to sacrifice career advancement and extra earnings to do that.

I would really love to see studies about this. My experience (44, male) is that this strongly depends on education, age and social background.

A great many highly skilled women are really loath to give up job and career just because child care is not avaible sufficiently and in a way that enables them to combine job and motherhood. They give it up, but hate it. And my feeling is that this opinion represents the majority in my generation and educational level.

My personal experience is that especially women of my parent's generation are prone to have strong opinions against women working while being mother. I perceive this as - at least in part - to be something like "I had to give up everything - why shouldn't you?"

And this is really a conflict within the german society. And I do not believe that "Stay At Home" is the most favored model. But for this you need studies. Politicans who are visible enough to influence opinion here are in most cases part of the elder generation (or, currently, centre-right CDU)

BTW: There are more and more fathers who want to live their role as father more actively and decide to remain at home.

Martin