For instance, administrative extensions of collective wage
agreements may reduce wage earnings dispersion among workers, but if they set labour
costs at too-high levels for some employers they may harm competition and productivity
and possibly reduce employment. Shifting the tax mix to less-distorting taxes – in
particular away from labour and corporate income taxes towards consumption and real
estate taxes – would improve incentives to work, save and invest, but could undermine
equity. Cash transfers targeted to lower incomes can be used to ease this trade off