Increased labor regulations are necessary as the workers are likely to trust the state and further comply with their civic duties. On the other hand, the enforcement increases efficiency, reduces market failures, reduces related work injuries, levels the playing field, and improves income distribution. The increased enforcement matters a lot to all workers as they must pay higher taxes to cater to the increased enforcement. This affects them negatively as some live within the minimum wage, striving harder to make ends meet.
Furthermore, increased taxes to cater for the enforcement would affect low-skilled firm workers as they will have little to invest as all the hard work will be for hand mouth. Additionally, most states consider the higher payments from working for more hours and the resulting difference after the income tax, which means the government transfers plus the market income minus the taxes. For example, when the taxes go higher, the income effect is that the after-tax income goes lower than the working citizens’ expectations. Thus, the people will need to work for more hours because of the less income after-tax, which requires individuals to do additional work to maintain the same living standards. The burden now goes to the documented workers as it strains public education and social services.