Options Available to Government in Reaction to Globalization Panel (a): National income is divided between capitalists (blue rectangle) and workers (beige triangle). Panel (b): With the tax, capitalists insist on a higher pretax return, so the foreign supply curve shifts up by the amount of the tax and the outcome is point B. Some capital leaves the country and earns the dark blue rectangle elsewhere. The capital that remains earns the light blue rectangle. Labour receives the light beige triangle in market earnings and the light green rectangle in transfers from the Government. Labour loses the dark green triangle, so this attempt at providing low-income support fails. Panel (c): As in panel (b), the tax on capital shifts the supply curve up. The employee payroll tax cut lowers the natural unemployment rate. With more labour to work with, capital is more productive, so the demand curve shifts up. The outcome is point C. Labour is better off, if the dark beige area (what labour gains) exceeds the dark green area (what labour loses).