What would happen if employers didn't pay pension taxes and only the workers had to pay all of the tax instead of splitting between employer/worker?

Question

who would bear the burden of the tax and if the pension plan and its taxes were eliminated would the number of workers with jobs be affected?

Answer 1

First, it is important to consider that we are in the LABOR markets. Meaning that workers are the suppliers (SUPPLY curve) and the firms are the consumers (DEMAND curve). To understand who bears the burden of the tax you would need to consider the relative elasticity of supply versus demand. That just means who has more bargaining power based on the options they have like available substitutes for instance. In a scenario in which the full burden of a tax went to workers, you would need a DEMAND curve that would be perfectly elastic relative to supply. So think horizonal DEMAND curve and a regular shaped SUPPLY curve. When you place a tax on this labor market the price that workers receive goes down by exactly the tax AND it must reduce the number of people employed relative to a tax free labor market. This should match your intuition -- if we require a tax that decreases the effective wage rate, less people will want to work at the given rate. If you eliminate the tax, the number of people willing to work increases because the effective wage would increase.