The government fixes something and then finds that the fix creates another problem. For example, you raise the minimum wage to $10. Prices increase to cover the increase in labor costs. So the guy who earns the $10 is no better off than when he earned $8. So you, the government say that the employer cant raise prices, in other words, price controls. But wait! How do you know prices havent risen? We, the government, need investigators and people to keep records and monitor the situation. So taxes have to go up. The people who are making more than $10/hr see their take home pay shrink. Now the employer has to keep up the government paperwork to prove his prices havent risen and that his minimum wage is $10/hr. So he has to hire someone to do that and that person costs more than $10/hr. Now that the employer is at breakeven, there is no money to hire a repair guy if the equipment breaks and there certainly isnt any money to buy new machines. If he cant replace broken machines, he goes out of business when the last machine breaks and he reduces his staff as he goes. A bunch a people end up collecting unemployment benefits. And the guy who builds the machines has no customers so he goes out of business. The government can fix this by nationalizing the companies. OK does this work? No it doesnt! Shortages and shoddy products are make and sold.
Posted on: Sun, 02 Feb 2014 16:43:22 +0000