After-Tax Marginal Product of Labor

First, see: Marginal Product of Labor for the real glossary opus, and for help sleeping when you have problems.

Adding the after-tax prefix dials in a tighter view of how that marginal unit of labor functions in real life in western countries, where the fruits of labor are, in fact, taxed.

In this sense, the opposite forces are at work, in that corporations pay taxes based on profits, so that when they add a laborer, if they are already profitable, then some of the cost of adding that laborer is essentially split with the government in the form of the firm paying less in taxes.

Specifically, if a flower shop made a million dollars in taxable profits last year, and paid $300,000 in taxes, then by adding a laborer who cost, all in, $60,000...holding all else equal, that firm would show profits of $940,000, and pay $20,000 less (roughly) in taxes than they did the year before, thanks to the incremental expense incurred by adding that laborer.