Effective tax rate on entering employment for parents using childcare services
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This indicator measures the proportion of earnings that are lost to either higher taxes, lower benefits or childcare costs when a parent with young children takes up full-time employment and requires use of centre-based childcare services.

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1. Calculations are for families with two children aged 2 and 3. Parents are aged 40.
2. Family benefits, childcare benefits as well as childcare costs are included in the calculations. Childcare benefits are benefits designed to reduce the costs of childcare. They can be received in the form of allowances, tax concessions, fee rebates and increases in other benefit entitlements. Childcare costs are the gross childcare fees paid by parents for full-time care in centre-based facilities.
3. The numerator is the change in tax liabilities and benefit entitlements plus childcare costs incurred when a parent moves into work. The denominator is the gross earnings of the parent moving into work.
4. Guaranteed Minimum Income (GMI) benefits are included in the calculations, also when the selected main out-of-work benefit is unemployment benefit. Where GMI benefit entitlements change over time, calculations refer to the 2nd month of benefit receipt when the selected main out-of-work benefit are GMI benefits. When the main out-of-work benefit is unemployment benefit users can select different months of benefit claim: 2nd, 4th, 6th, 12th, 18th and 24th. Where benefit receipt is subject to activity tests, such as active job-search or being available for work, these requirements are assumed to be met by all household members.
5. If relevant for the calculation of benefit entitlements, earnings in the previous job are assumed to be the same as those in the new job.
6. Calculations assume entry into full-time work. For couples, the partner of the parent who is moving into work is assumed to work full-time at 67% of the average wage.
7. If housing benefits are included in the calculations, these are calculated assuming a household renting in the private market paying rent equal to 20% of the average wage. Rent levels are the same for all family types.
8. Where benefit rules are not determined on a national level but vary by region or municipality, results refer to a “typical” case (e.g. Michigan in the United States, the capital in some other countries). A full description of the policies included in the calculations for each country is available
here.
9. For a detailed description of the assumptions underlying the OECD Tax-Benefit model and the related policy indicators, please see the methodology document.
10. For more information, visit the project webpage or contact the OECD tax-benefit team.

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The first preliminary release of year T-1 indicators is in February. As this release is based on projected wage values and preliminary information on tax rules, any use of these indicators should include the following disclaimer: “Results based on preliminary data and wage estimates”. The second final release of year T-1 indicators is scheduled in April.

Effective tax rate on entering employment for parents using childcare servicesAbstract

This indicator measures the proportion of earnings that are lost to either higher taxes, lower benefits or childcare costs when a parent with young children takes up full-time employment and requires use of centre-based childcare services.

Other data characteristics

1. Calculations are for families with two children aged 2 and 3. Parents are aged 40.
2. Family benefits, childcare benefits as well as childcare costs are included in the calculations. Childcare benefits are benefits designed to reduce the costs of childcare. They can be received in the form of allowances, tax concessions, fee rebates and increases in other benefit entitlements. Childcare costs are the gross childcare fees paid by parents for full-time care in centre-based facilities.
3. The numerator is the change in tax liabilities and benefit entitlements plus childcare costs incurred when a parent moves into work. The denominator is the gross earnings of the parent moving into work.
4. Guaranteed Minimum Income (GMI) benefits are included in the calculations, also when the selected main out-of-work benefit is unemployment benefit. Where GMI benefit entitlements change over time, calculations refer to the 2nd month of benefit receipt when the selected main out-of-work benefit are GMI benefits. When the main out-of-work benefit is unemployment benefit users can select different months of benefit claim: 2nd, 4th, 6th, 12th, 18th and 24th. Where benefit receipt is subject to activity tests, such as active job-search or being available for work, these requirements are assumed to be met by all household members.
5. If relevant for the calculation of benefit entitlements, earnings in the previous job are assumed to be the same as those in the new job.
6. Calculations assume entry into full-time work. For couples, the partner of the parent who is moving into work is assumed to work full-time at 67% of the average wage.
7. If housing benefits are included in the calculations, these are calculated assuming a household renting in the private market paying rent equal to 20% of the average wage. Rent levels are the same for all family types.
8. Where benefit rules are not determined on a national level but vary by region or municipality, results refer to a “typical” case (e.g. Michigan in the United States, the capital in some other countries). A full description of the policies included in the calculations for each country is available
here.
9. For a detailed description of the assumptions underlying the OECD Tax-Benefit model and the related policy indicators, please see the methodology document.
10. For more information, visit the project webpage or contact the OECD tax-benefit team.

Validation

The first preliminary release of year T-1 indicators is in February. As this release is based on projected wage values and preliminary information on tax rules, any use of these indicators should include the following disclaimer: “Results based on preliminary data and wage estimates”. The second final release of year T-1 indicators is scheduled in April.