Model Situations of Families with Small Children Regarding Earnings When

Caring Parent Enters Labour Market

Robert JahodaVUPSV, v.v.i

Presentation Contents

1. Theory – Model Evaluation of Labour Market Entry Conditions

2. Practical Examples– Household 2+2; Prague– Household 1+1; Prague– Household 2+3; Zlín– Household 1+1; Municipality up to

10,000 inhabitants

3. Conclusions and Discussion2

Maternal Employment Rates by Age of Youngest Child, 2007 (OECD; Family Database)

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Financial Stimuli by Labour Market Entry

• Change of tax payment (social and health insurance + income tax)

• Costs of childcare (scope of services vs. price)

• Costs of commuting (?)

• Deciding about work – optimizing process how many options can they choose from?

• Loss of parental allowances (?)

• Reduction of other state social support allowances (?)

• Decreased allowances of assistance in material need (?)

• Financial stimuli are not the only factor in the family decision making

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AETR – Financial Stimuli Indicator

• If I decide to start a job for the gross wage of CZK 20,000 (HP1) and the net monetary income for the household is CZK 6,000 (ΔČPP), I will be subjected to effective taxation of 70 %

• Is the net monetary income sufficient to compensate for my starting a job?

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What do we know about households receiving family allowances?

• Structure• Education• Housing and costs• Income differentiation

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Model Households• A household with children, one is 2 years old• The woman is deciding whether to enter the

labour market• By entering the labour market, she can expect an

income that will depend, among others, on:– Scope of employment – Abilities (education)– Regional labour market

• QUESTION: What effective taxation will the household be subjected to if its earned income is x % of the income median (CZK 20,000)

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Effective Taxation and its Decompositionfamily 2+2; home ownership in Prague; college education;

partner's wage is 150 % of the median; higher parental allowance assessment; private childminding CZK 12,000

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Effective Taxation for Various Levels of Partner's Income

family 2+2; home ownership in Prague; college education; higher parental allowance assessment; private childminding CZK 12,000

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Effective Taxation for Various Levels of Partner's Income

family 2+2; home ownership in Prague; college education; higher parental allowance assessment; private childminding CZK 12,000

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Effective Taxation for Various Levels of Partner's Income

family 2+2; home ownership in Prague; college education; higher parental allowance assessment; private childminding CZK 12,000

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Effective Taxation for Various Levels of Partner's Income

family 2+2; home ownership in Prague; college education; higher parental allowance assessment; private childminding CZK 12,000

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Effective Taxation and its Decomposition family 2+2; home ownership in Prague; college education; partner's wage is 0 % of the median;

higher parental allowance assessment; private childminding CZK 12,000

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Effective Taxation and its Decompositionfamily 2+2; home ownership in Prague; college education; partner's wage is 0 % of the median;

higher parental allowance assessment; private childminding CZK 12,000

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Effective Taxation and its Decompositionfamily 2+2; home ownership in Prague; college education;

partner's wage is 75 % of the median; basic parental allowance assessment; nursery (CZK 2,500)

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Effective Taxation and its Decompositionfamily 2+2; home ownership in Prague; college education; partner's wage is 75 % of the median;

basic parental allowance assessment; nursery (CZK 2,500)

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Effective Taxationfamily 1+1; tenement in Prague; secondary education with a graduation exam;

basic parental allowance assessment; nursery (CZK 2,500)

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Net Income and its Decompositionfamily 1+1; tenement in Prague; secondary education with a graduation exam;

basic parental allowance assessment; nursery (CZK 2,500)

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Effective Taxation and its Decompositionfamily 2+3+2; home ownership in Zlín (+ parents); apprentice education; partner's wage is 75 %

of the median; basic parental allowance assessment; a childminding grandmother

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Effective Taxation and its Decompositionfamily 1+1+2; living with parents in a small town; apprentice education; basic parental allowance

assessment; a childminding grandmothercosts for commuting CZK 3,000

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Conclusions and Discussion• The decision about entering

the labour market is influenced mainly by the costs of childcare together with the entitlement to parental allowances

• The impact of other allowances is limited – the beneficiary is rarely poverty-stricken

• The tax system "discourages" from part-time employment

TYPICAL CASE• Loss of parental allowance:

CZK 7,600• Nursery costs: CZK 2,500• Loss of tax discount for the

"partner": CZK 2,070 xxxxxxxxxxxxxxxxxxxxxxxxx• TOTAL: CZK 12,170

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Financial Impact - State

• A woman on parental leave from the perspective of the state:– Saved costs for nurseries (carried by the

establisher)– Lower tax revenues – the model does not include

social and health insurance paid by employers (34 %)

– Duty to pay the health insurance for the woman on parental leave

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THANK YOU FOR YOUR ATTENTION

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