The situation often looks like this: people become parents, the mother takes parental leave and stays at home with the baby, the father continues to work, maybe takes the two “father’s months” from the parental allowance, someone has to earn the money and he just earns it more than you. At some point the child is older, goes to daycare or school, the mother would like to go back to work, happily in her old job, maybe part-time now, but it’s just not worth it because taxes and social security contributions devour almost everything she earns. What is worthwhile instead: a mini job.
In a new study commissioned by the Bertelsmann Foundation, the Ifo Institute has calculated an example: If the man earns 48,000 euros gross per year, the wife would earn an additional 5400 euros a year with an hourly wage of ten euros and a mini-job with ten hours a week. If she chooses a part-time job with 20 hours a week instead, with the same gross hourly wage, the family does not even have an additional 1,000 euros.
Many of the so-called second earners, i.e. mostly women who earn less than the man in a heterosexual marriage and contribute a small part to the family income, often opt for a mini-job because of the tax burden, which is particularly vulnerable to crises, especially in the corona pandemic has proven. These jobs have major disadvantages, especially in terms of unemployment insurance and pension provision – which becomes a problem especially when the relationship ends. “We must succeed in freeing women and mothers from the trap of second earners,” says Manuela Barišić, the Bertelsmann Foundation’s labor market expert. “A considerable part of the workforce of women is currently not being fully exploited.”
Ifo Institute and Bertelsmann Foundation propose real splitting
The Foundation and the Ifo Institute recommend reforming spouse splitting and the mini-job regime together. The conversion of the current spouse splitting into a real splitting and at the same time the mini-jobs into social security and taxable employment could bring 124,000 people into work, 108,000 of them women. The proposal comes at a suitable time, because it is likely to become the subject of the ongoing exploratory talks between the SPD, Greens and FDP about a so-called traffic light coalition. The FDP does not want to abolish the splitting of spouses, but advocates changes in mini-jobs. The Greens and the SPD had already spoken out in the election campaign for a new regulation or abolition of spouse splitting, which so far has resulted in a second earner usually paying much higher taxes on a low income than the usual entry tax rate of 14 percent.
Of the 7.6 million wives in Germany between the ages of 25 and 60, around three quarters of six million have a lower income than their partner and are therefore second earners, according to the Ifo Institute. The current tax and social security system set the wrong incentives for all of them. Ifo Institute and Bertelsmann Foundation propose what is known as real splitting as an alternative to the current spouse splitting. Both spouses would be assessed separately for tax purposes, but a limited amount of EUR 13 805, which reflects the maintenance obligations, should be transferred from the partner to the partner. This reduces the tax burden for the second earner, so that taking up employment or increasing working hours would be more worthwhile for her. The mini-jobs are to be abolished, as it were, social security contributions would then be due from the first euro in income, but with a very low contribution rate at the beginning. The full rate would result in the calculation at 1,800 euros, which corresponds to full-time employment in the low-wage sector. According to Bertelsmann and Ifo, this combined reform would hardly cause any additional costs for the state.