<p>Your guess that somewhat is happening with the slope was a good one. The slope will indeed change. If you want to draw that new Demand line (<span class="math-container">$D_1$</span>) it has to start at the exact same point of the old demand line (if wages are zero the percantage tax will be zero too). The correct intersection with the Y-Axis would be: <span class="math-container">$(1-t) W_0$</span> (this simply means one minus the tax rate (<span class="math-container">$t$</span>) times the old intersection point (<span class="math-container">$W_0$</span>). I also made a little graph: <a href="https://i.sstatic.net/4SLxQ.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/4SLxQ.png" alt="enter image description here" /></a></p>

CC BY-SA 4.0
2020-12-30T10:09:18.383Z
2020-12-30T16:40:04.510Z
2020-12-30T16:40:04.510Z
Levittstyle
<p>In the textbook &quot;Borjas, G.J. Labor economics.&quot; (Boston, Mass.; London: Irwin/McGraw-Hill, 2009)
fifth edition [ISBN 9780070172708]. Below is a screenshot of the example of payroll tax of 1 dollar on the employer. And the labor demand curve shifts down by 1. What happens if the tax is not 1 dollar but, say, 10% of wage? I know that the labor demand curve will shift downward. But does it also rotates in a way that it has a steeper slope?
<a href="https://i.sstatic.net/9UjYw.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/9UjYw.png" alt="enter image description here" /></a></p>

<labor-economics><taxation>
How does demand curve for labor change when there is a proportional payroll tax on employer
Sybil Su
# How does demand curve for labor change when there is a proportional payroll tax on employer

(Asked by: username_0 on 2020-12-30)

In the textbook "Borjas, G.J. Labor economics." (Boston, Mass.; London: Irwin/McGraw-Hill, 2009)
fifth edition [ISBN 9780070172708]. Below is a screenshot of the example of payroll tax of 1 dollar on the employer. And the labor demand curve shifts down by 1. What happens if the tax is not 1 dollar but, say, 10% of wage? I know that the labor demand curve will shift downward. But does it also rotates in a way that it has a steeper slope?
[![enter image description here](https://i.sstatic.net/9UjYw.png)](https://i.sstatic.net/9UjYw.png)

**Tags:** labor-economics, taxation

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## 1 answers

### Answer by username_1 on 2020-12-30. Score: 3 | Accepted answer

Your guess that somewhat is happening with the slope was a good one. The slope will indeed change. If you want to draw that new Demand line ($D\_1$) it has to start at the exact same point of the old demand line (if wages are zero the percantage tax will be zero too). The correct intersection with the Y-Axis would be: $(1-t) W\_0$ (this simply means one minus the tax rate ($t$) times the old intersection point ($W\_0$). I also made a little graph: [![enter image description here](https://i.sstatic.net/4SLxQ.png)](https://i.sstatic.net/4SLxQ.png)


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