Comments on Paper by Azemar and Desbordes

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Comments on Paper by Azemar and Desbordes

• Chris Heady
• University of Kent

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Policy Relevance

• Do Employers Social Security Contributions
  (ESSCs) contribute to unemployment, by increasing
  labour costs?
• Do ESSCs reduce a countrys attractiveness to
  business? This is suggested by, among others
• Total Tax Contribution (PwC)
• Doing Business (World Bank and PwC)

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Results

• For a measure of non-wage labour costs that
  include ESSCs but much else besides (such as
  employers contributions to private pensions)
• About 70 of additional costs are reflected in
  reduced wages, with the balance adding to
  business costs.
• There appears to be no difference between the
  short-run and long-run effects.

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Policy Implications

• ESSCs mostly reduce wages and so problems of
  unemployment and business attractiveness are
  significant but not as large as some suggest.
• BUT
• Results might be different if only ESSCs were
  included in the empirical analysis.
• Minimum wages can have an important role.

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Possible Further Work

• Distinguish between compulsory and voluntary
  payments
• Distinguish between payments that are closely
  linked to benefits and those that are not
• Distinguish between countries with and without
  minimum wages (and workers close to and far above
  the minimum wage).
• NOTE This is a very challenging agenda