Fiscal power and labor inequality: Taxation, transparency, and wage structures in OECD economies

Abstract

This article investigates the relationship between fiscal policy, corporate financial behavior, and labor market inequality across a sample of OECD countries between 2015 and 2024. While taxation has long been recognized as a tool for macroeconomic redistribution, its role in shaping internal corporate dynamics and labor outcomes has received comparatively little attention. This study addresses this gap by examining how top personal income tax rates, corporate tax revenue, and ESG-related tax transparency influence post-tax income inequality, wage dispersion within firms, and the prevalence of precarious employment.

The research adopts a mixed-methods approach. Quantitatively, a fixed-effects panel regression model is applied to harmonized fiscal and labor data from eight OECD countries. The results reveal that both progressive income taxation and higher corporate tax collection are significantly associated with lower post-tax inequality. Additionally, corporate fiscal transparency—measured through ESG reporting on tax and labor practices—correlates with narrower internal wage gaps and lower labor precarity. These findings suggest that fiscal regimes shape not only national redistributive outcomes but also organizational decision-making and employment models.

To complement the statistical analysis, the study conducts a directed qualitative content analysis of fiscal policy documents and corporate reports. This analysis shows that in countries with stronger equity-oriented fiscal discourses (e.g., Sweden, France, Germany), taxation is framed as a legitimate mechanism for promoting social cohesion and wage fairness. In contrast, countries with more market-oriented discourses (e.g., United States, Ireland, Mexico) tend to justify tax policies primarily in terms of competitiveness and administrative efficiency, reflecting and reinforcing more fragmented labor outcomes.

The article contributes to the literature by integrating perspectives from public finance, labor studies, and corporate governance. It argues that taxation should be understood not merely as a fiscal tool, but as a structural institution that shapes distributive justice and labor equity. The findings have direct implications for policymakers and organizations seeking to design equitable and sustainable labor systems under conditions of global economic transformation.