Letter: Politicians don’t understand basic economics
It is really amazing to me how we continue to elect and re-elect politicians who know nothing about basic economic principles. The debate on minimum wage is a good example. The simple law of supply and demand tells us that as the price of something goes up, demand will go down. We see this relationship happen over and over in in our daily lives on things like fuel, food products, housing, entertainment, and anything else you buy on a regular basis. As the price of a good or service goes up, demand goes down. As prices go up we look at lower cost alternatives like driving less or carpooling, buying generic food products, or buying fewer meals at restaurants. We decide to rent a movie instead of going to the theater. We stay in our old home instead of building that new one we want. The list goes on and on.
This same principle holds true for employers hiring employees. If the government dictates that the price paid for something must go up 10 percent, 20 percent or even 50 percent, as proposed, employers will react accordingly and decrease their use of this higher cost item, labor in this case. Managers and small business owners will work more hours themselves rather than pay the higher cost of labor. Restaurants and manufacturers will automate their processes to remove even more of the increased cost of labor. Lines at service providers and retailers will get longer as fewer employees serve the same customer base since it will require more revenue per employee-hour to remain solvent. The result will be significantly fewer jobs at the lower end of the pay scale. Driving lower income people out of their jobs seems like a strange solution to their low income problem.
Politicians who think this law of supply and demand doesn’t apply to them or their agendas are naive. This is one law they can’t change or dictate who is exempt from its consequences. It is a law of nature based upon how people make decisions. We have seen the government try to change this law and fail miserably over the years. The Affordable Care Act (Obamacare) is a recent example just now unfolding. The government has dictated who will be covered by health insurance (everyone) and how much they will pay based upon their income. The act has, in effect, driven demand for healthcare artificially high. In fact, it has driven demand to its highest possible level by requiring everyone to buy it. When demand for an item goes up, the law of supply and demand says that the price will go up as well. When demand skyrockets, you can expect the same for prices. If you haven’t seen renewal pricing on your healthcare plan for next year, guess what? You aren’t going to like it. Supply and demand; it’s the law.