The single most important economic and sociological change in our society in the past 60 years has been the entry of women into the labor market:

• Between 1950 and 2000 the labor force participation rate of women between 25 and 55 years of age more than doubled; today, more than 75 percent of these women are in the labor market.
• Less than 12 percent of mothers with children under 6 were in the labor force in 1950; today, more than 60 percent are working.

These changes have had a major impact on family life. For example:   

• Since 1940, the proportion of working households that are one wage-earner and a stay-at-home spouse has declined from two-thirds to less than one out of four (21 percent).
• Dual-earner families — with both spouses in the labor market — now constitute almost two-thirds of all married couples.

Despite these remarkable changes, our public policy institutions have not kept apace. Tax law, labor law and a host of other institutions are still designed from top-to-bottom to favor women who remain in the home and are often unfair to married women who enter the labor market. The highest tax rates in our economy, for example, are mainly paid by women wage earners. In fact, women earning only modest incomes can pay taxes at rates that are twice those paid by such multi-millionaires as Warren Buffet and Bill Gates. Consider that:

• Even if she earns only the minimum wage, a wife is taxed at her husband’s tax rate. When all taxes and all costs are considered (including the cost of child care and other services she was previously providing as a homemaker), a woman in a middle-income family can expect to keep only about 35 cents out of each dollar she earns.
• If the women’s husband dies prematurely, Social Security will provide a modest benefit as long as she stays home and takes care of children; but if she works, the combined effect of direct taxes plus loss of benefits will create a marginal tax rate of 87 percent — leaving her with only 13 cents out of each extra dollar she earns.
• Once the widow’s children are grown, Social Security benefits will cease and she will be on her own to fend for herself; but if she previously responded to the system’s anti-work incentives, by remaining out of the labor market, she will now have to enter the market without job skills.
• If the woman goes on welfare, she will confront a newly reformed system that is supposed to encourage work; however, when explicit taxes are combined with loss of benefits, her marginal tax rate will be about 79 percent — leaving her with only 21 cents out of each dollar of wage income.
• When the woman reaches the retirement age she will once again qualify for Social Security benefits, but if she tries to supplement those benefits with wage income, special taxes on the elderly will make her marginal tax rate 64 percent — beyond a very modest level of income, she will get to keep only 36 cents out of each extra dollar she earns.

Of course, all the public policies that burden women can also in principle burden men. But because of the nature of work and family life, they are much less likely to do so. Here are some other examples:

• Both men and women workers pay the same unemployment insurance taxes, but because women are more likely to work part-time and because they voluntarily move in and out of the labor market more frequently (e.g., to raise children or care for a parent, etc.), they are less likely to receive any benefits in return for the taxes they pay.
• Because Social Security taxes are levied on all earnings until capped at a high income level, dual-earner households generally pay considerably more in taxes than single-earner households, but they will get only a minimal increase in Social Security benefits.
• Because women live longer the men, they will be more burdened by the income taxes paid on Social Security benefits, which will cause many middle-income seniors to forfeit more than half of their private pension income and IRA withdrawals.

Women are adversely affected by public policies in other ways. In contrast to some other developed countries, the United States encourages employers rather than government to provide such benefits as health insurance and pensions. Our private, employee benefits system is not the result of free market forces, however. Instead, it has been shaped and molded by federal law designed to accommodate a full-time worker with a stay-at-home spouse and penalize any other arrangement. For example:

• Because they are more likely to work part-time, women are less likely to qualify for employer-provided benefits.
• Because they move from job to job and in and out of the labor market more frequently than men, women are more likely to be burdened by employee benefit programs that penalize job switching (e.g., lack of vesting in a pension plan).
• And when people acquire health insurance and save for retirement on their own (not through an employer), the tax system is far less generous.

Couples with two full-time working adults are disadvantaged in other ways by the current system. They often find that they must accept unnecessary, duplicate sets of employee benefits, say, because the wife is unable to opt for higher wages if she foregoes health insurance from her own employer when she is already covered on her husband’s employer’s plan.

Many changes are needed to bring aging institutions into sync with the way people are living their lives in the 21st century. Here are a few suggestions:

• We need a fairer tax system for two-earner couples, perhaps one that allows both spouses to file completely separate tax returns.
• We need a flexible employee benefit system that gives employees more choices, making it easier for dual-earner couples to obtain higher wages rather than unneeded, duplicate benefits and for part-time workers to accept lower wages in return for more valuable health and retirement benefits.
• We need flexibility in labor law, making it easier for workers (especially parents with young children) to choose alternatives to the traditional 40-hour work week.
• We need to replace the arbitrary limits on retirement savings contributions with a system that is fairer to women who move in and out of the workplace.
• We need a fairer system for providing tax relief for health insurance — especially for single parents who leave the workforce for extended periods of time.
• We need to find ways to make health and retirement benefits portable — so that people are not penalized when they switch jobs.
• We need a completely new approach to the treatment of spouses under Social Security; earnings sharing (where payroll tax contributions are divided like community property) could easily be applied to any new system of personal retirement accounts.
• We should consider abolishing the earnings penalty for those receiving Social Security survivors benefits.

Unlike many other writings on “women’s issues,” this book does not assume that in order for some people to be successful we must limit the freedom or raise the taxes of others. Nor are we promoting a social or cultural outcomes. Instead, we assume that women in our society are capable of making choices that are right for them and are perfectly capable of living productive, satisfying lives, provided that misguided public policies do not hold them back.