Fiscal Barriers to Full Employment

The structure of employment and technology is strongly influenced by the incidence of taxes and subsidies. There are a number of subsidies to capital investment in the tax and regulatory systems which encourage the adoption of more capital intensive techniques than would otherwise be employed. Similarly, financing Social Security and health insurance through payroll taxes to which the employer contributes also appears to serve to inflate the cost to the employer of employing low-wage workers. Reorganizing the fiscal system so as to minimize these distortions should enhance the effectiveness of any full employment program enacted.