The effect of tax rates on unemployment

Here is a summary of "Work and families" by Annette Walling of the ONS. The stat's are for 2004-05 but they won't have changed much.

Unemployment rate among married/cohabiting parents - 19% (men 9%, women 29%).
Unemployment rate among lone parents - 46% (women 47%, men 33%).

Lone parents (90% of whom are women) have very high out-of-work benefits and a very high total marginal withdrawal rate (i.e. for every £ they earn, they are paying 33p PAYE and losing at least another 37p in Working Tax Credits). If an unemployed lone parent finds an average job paying £450 a week, the household's net income goes up by barely a third of that, about £160.

Hardly surprising then that 47% of single mothers are out of work - there's not much point working (the figure is lower for lone fathers - but men are highly unlikely to get the kids if they don't have a job, and men tend to earn enough to break free of unemployment trap).

91% of married/cohabiting fathers are in work. These households are entitled to little or no means-tested benefits. If a mother goes back to work earning £450 a week, the household's net income increases by around three-quarters of that amount, about£340 (paying £110 in tax).

Hardly surprising then that only 23% of all married/cohabiting mothers are out of work (once the children are at school).

Conclusion - if you reduce the total marginal withdrawal rate from 64% to 25%, you halve unemployment.

Not rocket science is it?