SELECTIVE EMPLOYMENT TAX: IMPACT ON PRICES AND THE BALANCE OF PAYMENTS*
| Author | A. A. McLean |
| Published date | 01 February 1970 |
| Date | 01 February 1970 |
| DOI | http://doi.org/10.1111/j.1467-9485.1970.tb00483.x |
SCOTTISH
JOURNAL
OF
POLITICAL
ECONOMY
February
I970
SELECTIVE EMPLOYMENT TAX:
IMPACT ON PRICES AND THE
BALANCE
OF
PAYMENTS*
A.
A.
MCLEAN
I.
Introduction
Discussion of the Selective Employment Tax (SET) has centred round
its implications for employment' and the costs of producers. There has
been little discussion of the price implications of the SET, either in general
or as the
tax
has developed through its various modifications since its in-
ception in May
1966.
This paper attempts to generate estimates
on
an
industry-byindustry basis
of
the price changes likely as a result of the SET.
These price changes are then used
to
generate estimates
of
the changes in
Balance of Payments (BOP) that are attributable to the SET.
The procedure followed was to find or impute employment figures
on
an industry basis divided into the three SET categories
:
Men; Women and
Boys; Girls. The appropriate SET net tax or subsidy payments per em-
ployee, expressed
on
a
per mum basis, were applied to these employment
figures to generate the changes in labour costs implicit
in
the SET. By the
use of input-output analysis and an appropriate model of the process
of
price formation, these labour cost changes were translated into price
changes. Using these price changes with appropriate elasticity values and
the imported-input-requirements coefficients, plus
an
adjustment for
the macro-economic implications of the tax, estimates of the changes in
exports and imports were obtained which were combined to give the
estimated changes in the
BOP.
*The author wishes to thank,
for
their comments on earlier versions
of
this
paper, Professor
R.
M.
Stem and other members
of
the Research Seminar
in
Inter-
national Economics at the University
of
Michigan; and Professor
A. D.
Bain and
other members
of
the Staff
Seminar
in Economics at the University
of
Stirling.
J.
P.
Hutton and
K.
Hartley, 'The Selective Employment Tax and the Labour
Market,'
Bdish
Journal
of
Zndustrial
Relations,
(November
1966),
pp.
289-303.
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