How would an increase in the labor force affect the revenues collected by the federal government?

Question

Preston Brady

Business

9 September, 04:48

How would an increase in the labor force affect the revenues collected by the federal government?

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Answers (1)

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Erika Holmes · Answer 1

See explanation below for answer.

Explanation:

One way in which the federal government makes money is to impose a tax on the salaries and wages earned by workers. This tax is a particular percentage of the salaries and wages of workers, and it is collected by the government to be used for various purposes.

Therefore, if the labour force were to be increased, meaning an increase in the number of workers in the economy, this would lead to more people earning wages and salaries, thereby translating into more tax to be collected by the government.

Hence, an increase in the labour force has a positive effect on government revenue, because it will lead to an increase in revenue collected from taxes.