Tax thresholds, household bargaining, and training choices: Do payroll caps shift who upskills?

This project investigates whether the male partner’s crossing of the payroll tax contribution limit changes women’s training uptake and returns. Using PSID panels, it estimates how the partner’s entry into payroll tax–exempt earnings affects the secondary earner’s participation in employer training, certification programs, or ALMPs, and subsequent wage and mobility paths. Identification follows a fixed-effects with individual slopes approach extended to training outcomes and longer horizons. A structural interpretation connects to household bargaining theory: if women’s effective bargaining power falls due to income shocks, training choices and returns may shift, e.g., women selecting safer courses with lower wage upside. A complementary field experiment would offer time-flexible, employer-recognized training vouchers targeted around threshold crossings to test if timing and modality can neutralize negative spillovers on women’s careers. The novelty is linking tax-induced intra-household income shocks to training behavior and returns, opening a new margin for policy design to preserve human capital accumulation and mitigate within-household inequality.

References:

1. The payroll tax contribution limit and women's labor market outcomes. Manuel Schechtl, Andreas Haupt (2024). Journal of Marriage and Family.
2. Heterogeneous Returns to Active Labour Market Programs for Indigenous Populations. D. Feir, Kelly Foley, Maggie E. C. Jones (2022). Social Science Research Network.