The Missing Million: The potential for female employment to raise living standards in low to middle income Britain

Published on Jobs, Skills and Pay

The rise of female employment has been a central chapter of the story of living standards in the past 40 years. Yet even while reliance on women’s work has grown, the absolute pace of growth has faltered. After rising 7.4 percentage points in the 1980s, the UK female participation rate rose just 1.4 percentage points in the 2000s, leaving the UK ranked only 15th in the OECD on female employment and just 24th on a full‐time equivalent basis

Further gains in female employment present a rare opportunity to boost living standards in the years ahead. Yet although such gains are achievable, they will not come easily. They will only be won through a concerted effort to apply the lessons from the academic evidence and from the best performing countries around the world.

  • There is a case for shifting the emphasis of future spend away from some cash benefits and towards services like childcare. This would bring the UK closer into line with the academic evidence base and with the policy choices made by the top performing countries in a number of ways. It would reduce the effective marginal tax rates on second earners (both by reducing withdrawal rates and by reducing net hourly childcare costs), a key variable that we know boosts female employment.
  • Within the UK’s spend on family-related cash benefits there is a case for doing more to frontload support on young children. In the past ten years, the UK has moved strongly in this direction, although progress has slowed in the past year, with choices made by the coalition pulling in different directions.
  • As well as supporting the reweighting of spend in these two general ways – from cash to services and, within cash benefits, towards younger children – the evidence also points to a few more specific priorities.
  • In the case of frontloading cash support, one recent suggestion is that Child Benefit spend should be targeted at younger children. This would not be unprecedented (Iceland, for example, provides a Child Benefit supplement for children under seven).
  • Given the government’s stated intention to continue the strategy of raising the personal allowance, there is a case for moderating its downsides by considering approaches that would recognise families with children in the tax system. Recognising couples (especially married couples) in the tax system would be highly regressive.