Good Intentions

I find it funny that some people equate wish lists and good intentions with actual results. People will sit in their armchair and declare the things people ought to have and they seem convinced that simply by uttering these words, those things will become reality. These people must think they have god-like powers. A simple utterance will change all of society and in the process change law of economics as necessary.

It is very common to hear things like "People deserve a living wage, not minimum wage", "Companies should all provide top-quality health insurance to every employee", "A car is not a luxury, it's a necessity in our everyday lives", "Let's stop using fossil fuels and change to something green like solar panels."

These declarative statements are made in a vacuum, away from pesky reality. People who simply state that these desires cannot simply appear without other consequences are someone seen as bad people.

On the other hand, people who propose such measures without doing anything whatsoever to actually make them happen, are applauded as farsighted visionaries who really care about "society".

Sensible people on the other hand recognize that in the world there are rarely absolutes when it comes to economics. In reality, everyone makes decisions based on costs and benefits. It might be nice to have solar power, but if your electricity bill goes from $120 a month to $800 a month, you may think twice.

Another point is that the do-gooders who propose these utopian ideas never also advocate freedom of choice. They will only advocate some "advancement" of society if it affects everyone the same, and it doesn't personally cost them anything. Also, some believe in the fairy tale that the "government" will pay for it so they are off the hook. Ironically, they don't realize they themselves must fund the government in the first place.

One example of this is Obama is trying to force employers to buy health insurance for ALL employees who have a certain number of hours per week. The cut-off is now 30 hours. This even applies to the jobs with the lowest wages. The owner of Papa John's Pizza said he couldn't afford it, so he will instead reduce hours of employees to perhaps 28 hours per week so they are not considered full time.

At first, the owner of Papa John's may seem heartless, but there are many things which need to be considered. The pizza business, unlike government, does not operate in a fairy tale land of rainbows and butterflies where reality changes by simply uttering words. If Papa John had to provide health insurance to even the lowest level employees, it would effectively be a major increase in minimum wage. That would dramatically increase the price of pizza. A few things would happen. First of all, he would fire a bunch of employees because as price of pizza increases, demand decreases. Those most affected would be the lowest level employees with the fewest skills. While their productivity might justify a wage of $7.50 per hour, it may not be high enough to justify $11 per hour when one includes health insurance. So now, not only do these employees not have health insurance, they don't have a job.

Ultimately when it comes to wages, any additional benefits including health insurance, employment insurance, etc. will come together to give a number. Even at minimum wage here in Newfoundland, where it is $10 per hour, a company might end up paying $18 an hour once all the additional benefits are paid for. This is the number employers look at when deciding if they need more people. Mandating additional benefits to employees raises their real wage. As the real wage is artificially inflated, demand for lower skilled workers diminishes. Certain jobs may disappear altogether.

I went off on a long tangent about wages there, but it is simply to illustrate the point that there are no government actions on the economy which have purely beneficial consequences. Every benefit has a cost. One cannot simply look at the benefit and ignore the cost. And in almost every case I've yet come across, the cost far exceeds the benefit.