Little point in many mothers returning to work

Posted on September 09, 2015 by Micheál Collins

It makes little financial sense for many Irish mothers to return to work – that’s the conclusion of a new EU research study looking at the realities of the back-to-work choice faced by women across EU member states.

The study, by Olga Rastrigina and Alina Verashchagina, focuses on the financial gains for families where women return to work. It calculates the ‘Participation tax rate’ (PTR) faced by these earners, which summarises the combined effect of gains in earned gross income, payments of income taxation and social insurance contributions alongside any losses of welfare entitlements. A participation tax rate of 50% implies that half of the gains in earnings from commencing work are lost through changes to taxes and benefits.

For women in Ireland returning as second earners they found that:

  • Participation tax rates for women with no children are the second lowest in the EU, at 14.2% - only Greece has a lower rate.
  • Participation tax rates are also low for women with two children, at 18.2%, where these couples do not have to pay for childcare.
  • However, in situations where couples have to pay for childcare, the participation tax rate for a women with two children rises to 94% - the second highest in the EU.

In simple terms, the research finds that an Irish women with two children and returning to work is €6 better off for every €100 gross income earned - €18.40 goes to tax and social insurance and €75.60 goes to childcare. If one were to take into account the additional costs of work (transport, clothing etc) this small gain is likely to disappear.

A mother in a similar position in other EU countries is better off by the following for every €100 of gross income earned:

  • Germany + €15 (PTR = 85%)
  • Netherlands + €77.90 (PTR = 22.1%)
  • Sweden + €68.10 (PTR = 31.9%)
  • Austria + €70.90 (PTR = 29.1%)
  • Spain + €69.10 (PTR = 30.9%)

Only returning mothers in the UK face a worse situation that Irish women – where the costs of childcare more than wipes out any gains from taking up employment (see graph).

Despite the research finding that Ireland possesses rates of income taxation that are among the least discouraging to labour market participation in the EU, the inclusion of out-of-pocket childcare costs significantly alters the financial choices women (and couples) make regarding returning to work. As such, the research findings point towards a need for policy to address the provision of affordable childcare – both as a key aspect of boosting labour market participation and as key equality measure.

Looking at mothers returning to work at levels of earnings equal to their partners, the Irish PTR faced by a women with two children is less severe (65.1%) although it remains the second highest in the EU.

There are many reasons beyond income which make it worthwhile for women to return to work. However, given the current cost and provision of childcare in Ireland, from a financial perspective, most stay at home mothers are best advised to stay at home.


The study which was conducted as part of an EU wide equality research project is available here

A previous paper looking at the Costs of Work for employees in Ireland is available here.


Posted in: GenderInequalityJobsTaxation

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