How candidates can really help women

Government knows best

Women fought for the right to choose how to live their lives. Yet many government policies limit women’s ability to choose the lives they want.

Does the government support a woman’s decision to work?

Not if the woman is married, makes less than her spouse, and the couple files their taxes jointly. In this case, the government taxes the first dollar the wife earns at her husband’s highest marginal tax rate, not at the rate the wife’s salary warrants.

This marriage penalty creates a disincentive for women to work unless they are going to make the same amount, or more than, their husbands. And of course, the higher the marginal tax rate, the bigger the penalty.

To add insult to injury, while almost 80 percent of working mothers would prefer to work part time, almost two-thirds of them work full time. The tax on the money they earn is just too high to make part-time work financially viable.

High taxes and regulations hurt women

Women own 40 percent of closely held businesses, a majority of which are very small. According to the National Federation of Independent Business, high tax rates disproportionately penalize these entrepreneurs because many small business owners tend to file their business income through the personal income tax. High tax rates mean lower business and personal income and less ability to hire help at home or at work.

Workplace regulations can also make women’s lives harder. Many regulations make it difficult for employees to move between jobs and industries, which hurts women as they exit and re-enter the labor market more often during their careers than do men.

Even some regulations meant to protect women can produce bad outcomes. For instance, government mandates that employers must approve extended maternity leaves make hiring women of child-bearing age less appealing to employers. As a result, women are more likely to be unemployed or to see their pay limited — whether they want to have children or not.

Jonathan Gruber, an economist at MIT, has shown that real wages fell in states that adopted laws mandating comprehensive maternity expenses as opposed to the states that didn’t.

Government intervention makes women dependent

After fighting so hard for their independence, many women find themselves relying on government payouts and less prepared to face adversity.

Consider Social Security. Women depend on Social Security more than men. Based on Social Security data, almost 29 percent of women over age 65 rely on Social Security for 90 percent of their retirement income. That number increases to 46 percent for unmarried elderly women.

However, the expectation of a Social Security payment can make women worse off as it reduces their incentives to save and prepare for their own retirements.

Imagine if a woman could have saved and invested the 12.4 percent of her income she paid for years in payroll taxes (including the employer’s share) for Social Security. She could have it available in case of emergency during her lifetime or pass it along to her children or grandchildren if she didn’t need it anymore.

Depending on Social Security payments also makes women vulnerable to changes in government policies. At any time, Congress can reduce benefits even for people who paid their entire lives into the system. In a sense, it did that earlier this month by saying Social Security recipients won’t get a cost-of-living increase this year.

Starting in 2014, the system will run a deficit, and the trust fund will run dry in 2037. Benefit cuts seem inevitable, which is particularly bad news for women who tend to count on Social Security. These women stand to lose the most if they don’t break their current dependency on government payouts.

Not all government programs hurt women. A program such as Medicaid, at great societal expense, does help poor women by providing support for their children. But contrary to the rhetoric, many government interventions are detrimental to women rather than beneficial.

Government has difficulty distinguishing which programs aid women and which don’t. In short, women would be better off if government didn’t discriminate based on marital or parental status, gender or age, if it reduced regulations on businesses and dependency on government programs. Any party or candidate that promotes those policies would be great for women.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.