Final answer:
When government imposes a payroll tax on workers, the economic effects are similar to if the tax were imposed on employers, due to shifts in labor supply and demand that redistribute the tax burden.
Step-by-step explanation:
When government imposes a payroll tax on workers, the result is not simply a matter of who is handing the tax payment over to the government. Economically, both workers and employers bear the tax burden through changes in wages and employment. This scenario is underpinned by the concept that whether a payroll tax is levied on employers or employees, the effects on the labor market are generally similar due to shifts in the labor supply and labor demand curves. Specifically, a tax on workers will reduce their after-tax wage, leading to a leftward shift in labor supply as workers reevaluate their labor-leisure trade-off at lower wage rates. Simultaneously, employers face a higher overall cost of employment, which can cause a decrease in labor demand. However, the actual incidence of the tax — who is more affected — primarily depends on the relative elasticities of supply and demand for labor.
Considering the options provided, the final answer in a two-line explanation is: 'When government imposes a payroll tax on workers, the effects are identical to the effects had the government imposed the tax on employers.' This occurs because no matter on whom the tax is legally levied, the wage adjustments and changes in employment effectively distribute tax incidence between workers and employers based on market factors.