The Wealth of Nations Book 5 Chapter 2 Part 2 Article 3 - Taxes on Wages

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Taxes on labor have long shaped economies and labor markets. This video explores how taxes on wages affect both workers and employers. When governments impose direct taxes on wages, workers often demand higher pay to cover the tax, which drives up production costs and consumer prices. In agriculture, landowners bear the cost as farmers retain more of the crop’s value to cover increased wages. If higher wages aren’t possible, labor demand falls, leading to lower employment and reduced economic activity. Historical examples from France’s taille tax and Bohemia’s labor tax highlight how governments have imposed and adjusted wage taxes over centuries. Skilled workers face different pressures since higher taxes drive them to less-taxed trades, pushing wages up further. Public sector wages, however, are set by government decisions rather than market forces, leading to overpayment in some cases. Taxing government salaries has often been more politically acceptable than taxing labor directly. From the agricultural sector to skilled trades, this video breaks down how taxing wages impacts the economy, employment, and living costs.
Questions Answered:
How do taxes on wages affect labor costs and wages?
Why do employers pass the cost of wage taxes to consumers and landowners?
What happens when wage taxes reduce labor demand?
How did France's taille tax work?
How did Bohemia’s labor tax affect artisans?
Why do taxes on skilled labor increase wages further?
How do wage taxes influence unemployment?
Why are taxes on government salaries often more accepted?
How do taxes on agricultural labor affect land rents?
What’s the difference between taxing skilled labor and taxing government wages?

00:00 - Introduction to Taxes on Labour
00:11 - Wages and Taxes
00:40 - Impact on Employers
01:03 - Taxes and Demand for Labor
01:24 - Historical Examples
01:50 - Taxes on Skilled Workers
02:27 - Conclusion

#LaborTaxes #Wages #EconomicImpact