Let us see in stylized fashion how it went wrong in 1950-2005. Our discussion uses Holland as the example to clarify the general OECD situation. The discussion will also use simplifying assumptions and few footnotes, to keep the text transparant. These defects will be remedied in the subsequent chapters.
Key aspects are:
· heterogeneous labour, and the use of an earnings distribution
· the minimum wage and unemployment
· decomposition of the minimum wage in subsistence and tax burden
· analysis of the Tax Void
· differential indexation
· dynamic marginal tax rates
· consequences for the macro model: spillover and domino effects.