Within the wage-setting and price-setting framework, a government policy that funds a worker training program through a new tax on firms will automatically lead to a higher equilibrium real wage, because the resulting increase in labor productivity guarantees a net positive outcome.
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A government is considering a new policy to fund a nationwide worker training program by levying a new tax on firms. For this policy to successfully achieve a net increase in both the equilibrium real wage and the level of employment, which of the following conditions is most critical?
Evaluating a Government Training Program
Within the wage-setting and price-setting framework, a government policy that funds a worker training program through a new tax on firms will automatically lead to a higher equilibrium real wage, because the resulting increase in labor productivity guarantees a net positive outcome.
Justifying a Tax-Financed Training Program