Wednesday, January 8, 2014

Policies That Discourage Full-Time Work

By Casey Mulligan

The payroll tax holiday was an important factor helping the workweek recover after the recession, but the holiday is over and new public policies are pushing in the other direction.

Full-time positions pay more than part-time positions, even on an hourly basis.  Part-time positions require less time away from family, schooling, etc., which makes the choice of full-time versus part-time work a trade-off between income received and the amount of the time commitment.

A higher income tax or payroll tax rate tilts the balance toward part-time work because it reduces an important benefit of full-time work: extra income to spend. A lower rate does the opposite.

You might say that work schedules are set by employers, and that workers have no say in the matter.  But that ignores the fact that employers compete for employees, which is why many employers spend resources to offer health coverage, flexible scheduling and other fringe benefits that employees find attractive.

Historically, employers have responded to high income tax rates by creating part-time positions, especially when large numbers of potential employers were facing those rates.

Read the rest here.

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