Tax reform increased number of married women in employment

ESRI study links greater female participation in labour force to tax changes in 2000

ESRI study links tax reforms to increase in female participation in the workforce.

ESRI study links tax reforms to increase in female participation in the workforce.


Changes to the income tax code in favour of married women have led to a significant increase in the number of women in employment, according to a new study by the Economic and Social Research Institute (ESRI).

The research showed that a decision by the Irish government back in 2000 to switch from a system of joint taxation for couples to a more individualised set of rules led to a 5 per cent increase in female participation in the labour force.

Up to 2000, the State had a system of joint taxation, which allowed a working spouse to use the tax allowances, credits and bands of a non-working spouse.

This imposed a higher tax rate on the non-earning spouse if they joined the labour market, the ESRI said, making it less advantageous in many cases for spouses to take up employment.


At the time the changes triggered considerable debate and controversy with differing views as to how great the increase in married women’s participation would be, the think tank said.

However, the analysis shows that the employment rate of married women increased by 5-6 percentage points as a result of the reform while average hours of work increased by around two per week, underscoring the importance of removing barriers to work.

“This analysis indicates that the partial individualisation of the Irish taxation system achieved one of its stated goals, to increase the incentive for spouses to join the labour market, ” the report’s author Karina Doorley said.

“A broader evaluation of the impact of the reform, and the potential for any further extension of individualisation would also need to examine the associated changes in income distribution,” she said.

While labour force participation rates for Irish women have risen in recent decades they remain low by European standards with approximately 64 per cent of Irish women employed in 2016, compared to 77 per cent of Irish men.


Comparable figures from the UK were 72 per cent (women) and 83 per cent (men), and for the EU as a whole, they were 65 per cent (women) and 77 per cent (men).

Ironically the Irish gender pay gap, the different between average male and female earnings, is relatively low at around 14 per cent in 2014, compared to 21 per cent in the UK, and an EU average of 16 per cent.

However, the ESRI cautions that because Irish female labour force participation is low, it is comprised of a relatively better educated female workforce compared to countries with higher labour force participation.

It noted that an adjusted measure of the gender wage gap, which accounts for the characteristics of the population, puts the Irish gender wage gap closer to 17 per cent and the UK’s at around 12 per cent.