Compared to the labor market outcome when there are no payroll taxes, imposing a payroll tax on labor will typically result in:

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All of these outcomes are possible when a payroll tax is imposed on labor. Firms may choose to pay a higher wage to offset the burden of the tax, but this would reduce their profits. Alternatively, workers may receive a lower wage net of taxes, as the burden of the tax is shifted onto them. The tax could also lead to a decrease in overall employment if firms choose to hire fewer workers or reduce hours to avoid the tax, or if workers leave the labor force due to the reduced net wage. Dead weight loss is also possible, as both firms and workers may reduce their participation in the labor market due to the tax, leading to a loss in overall economic efficiency.

Compared to the Labor Market Outcome When There Are No