Households also supply labor to firms. If labor services are taxed more heavily, then households will supply less of them. Firms are assumed to maximize profit, which they do by combining labor and capital in order to produce the goods and services that households demand. In this process, firms supply goods and services. If they have to pay a higher sales tax, then they will charge more for their goods, sell less as a result, and have to reduce production.
Firms also pay wages and salaries to their workers.
If the cost of hiring their workers rises, for example, because unemployment insurance payments grow, then they will economize on their use of labor by cutting back or finding substitutes. There are six coefficients, each with an associated p-value given below it in parentheses. The p-values measure the statistical significance of the coefficients. We follow the convention whereby a coefficient is deemed statistically significant if its p-value is less than .10. Here the dependent variable is the logarithm of the number of jobs.