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Effort and wages: Evidence from the payroll tax

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  • Kevin Lang

Abstract

I show that under a canonical efficiency‐wage model, a per capita employment tax levied on the employer raises the wage. In contrast, under market clearing, wages fall regardless of whether effort is contractible. I examine the effect of increases in the earnings base for the payroll tax in the United States on wages of high‐wage workers for whom the change represents an increase in a per capita tax. In most specifications, the results suggest that wages rose, consistent with the efficiency‐wage model, but they are generally too imprecise to rule out large effects of wages on non‐contractible productivity that are insufficient to prevent market clearing. Provided labour demand is inelastic, the results are inconsistent with a model of contractible effort. Effort et salaire : l’exemple des prélèvements sociaux. Dans un modèle canonique de salaire d’efficience, je montre qu’une taxe à l’emploi par tête imposée à l’employeur est un facteur d’augmentation des salaires. En revanche, dans un modèle de salaire d’équilibre, les paies diminuent, que l’effort soit intégré par contrat ou non. Dans cet article, j’examine l’effet des relèvements successifs de la base de revenu assujettie aux prélèvements sociaux aux États‐Unis pour les travailleurs les mieux rémunérés, et pour qui de tels changements se caractérisent par une hausse de l’impôt par tête. Dans la plupart des cas, les résultats suggèrent une augmentation des salaires, conformément au modèle de salaire d’efficience. Néanmoins, de tels résultats sont généralement trop imprécis pour exclure les effets importants des salaires sur la productivité non intégrée par contrat, insuffisants pour empêcher un équilibre du marché. Si la demande de main d’oeuvre est inélastique, les résultats ne concordent pas avec le modèle d’effort intégré par contrat.

Suggested Citation

  • Kevin Lang, 2020. "Effort and wages: Evidence from the payroll tax," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(1), pages 108-139, February.
  • Handle: RePEc:wly:canjec:v:53:y:2020:i:1:p:108-139
    DOI: 10.1111/caje.12426
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    References listed on IDEAS

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