Taxation of part-time work in the OECD

Abstract

The share of part-time employment in total employment has risen in most OECD countries over the past decades. While this is often associated with increased female labour force participation and the desire of many workers to achieve an improved work-life balance, there has been a significant decline in the average earnings of part-time workers relative to full-time workers, as well as an increase in involuntary part-time employment in a number of countries. This paper presents a summary of the taxation of part-time work in OECD countries. It includes new calculations of the effective tax rates on part-time work including those for male and female part-time workers and for different household types. These indicators provide an evidence base for policymakers looking to understand the impact of the tax system on the choice of employment form. The analysis shows that average tax rates for part-time workers are lower than those applied to full-time workers in almost all OECD countries, reducing post-tax gender wage gaps, although marginal tax rates are often higher for part-time workers. These differences between the taxation of part-time and full-time workers are largely due to differences in earnings levels, and therefore to the progressivity of countries’ tax systems, rather than to differences in the tax treatment applied to part-time workers relative to full-time workers.