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The eroded minimum wage has now become the standard wage for almost all those newly employed in the manual sector (many graduates) and they now have no way to protect themselves.
Thus, welfare improves by reallocation of audits towards the manual sector.
24 This clearly holds also for the manual sector if concealment costs are higher than the tax rate.
If concealment costs are higher in the sector employing highly educated workers, i.e. κ h >κ m, there are even further incentives for the government to focus their audits on the manual sector.
The result from Proposition 7, that welfare is maximized when the government to a larger extent targets its audits to the manual sector, i.e. p m >p h if κ h ≥κ m, will still hold.
This distortion can, however, be corrected for by increasing the audits in the manual sector and reducing them in the sector for highly educated workers, which is captured by the right-hand side in (30) and (31).
Similar(54)
While dichotomizing the RGSC measure is a common and validated procedure, the meaning of social class (and the binary distinction) has become less relevant over time in the UK (with the increase in non-manual service sector jobs such as call centers, for example).
Jon Trickett, the shadow cabinet office minister, has identified four key groups of defectors: manual workers, public sector employees, ethnic minorities and the burgeoning metropolitan middle class.
They pointed out some of the main fields like care (for children or the elderly) sectors, manual or technical jobs in municipalities, social initiatives and organizations, or manual work in shop floors.
Railway workers with diverse occupational traits from both manual and administrative sectors involving locomotive engine pilots or drivers, railroad yardworkers, trackmen, maintenance workers, signalers, station masters, shunters, and office workers were predominantly classified as high strained workers because of their prolonged exposure to rigid protocols and limited rests [ 34].
The economy thus consists of four sectors: the formal and informal sectors for manual workers (denoted F,m and I,m) and the formal and informal sectors for highly educated workers (denoted F,h and I,h).
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Justyna Jupowicz-Kozak
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