The government is concerned about low employment rates and low earnings of young persons under the age of 25, including those who are no longer in school. It wants to help younger persons get started in the labor market. The government is considering a Social Security payroll tax cut for younger workers. This payroll tax is used to finance Social Security income benefits for retirees. The payroll tax is assessed equally on employers and employees: 6.2% each for a total of 12.4% on the first $133,000 of earnings. (For simplicity, treat the payroll tax as a unit tax on labor.) The proposal would eliminate this tax until age 25. Young workers would continue to accumulate eligibility for retirement benefits as if they and their employers were making payroll tax payments on their earnings.

Would you support the youth payroll tax cut? Under what conditions? Explain your position. Explain why?