At the End of the Progressive Rainbow:What Happens When Government Mandates Increase Costs?

March 25, 2016

This short article by the Wall Street Journal’s Andy Puzder neatly describes the effects of expensive government mandates.  Healthcare costs rise.  Minimum wages rise.  Companies use affordable technology to replace workers.  It has happened in retail.  It has happened in the airline industry.  And now it is happening in food service.

Of course, the mandated rise in minimum wages is meant to increase the availability of “living wage” jobs.  And healthcare mandates are supposed to provide affordable medical care to more people. Ironically, the actual result  is fewer entry-level jobs and a net growth of people living in poverty.  (Puzder points out San Francisco’s widening standard of living gap as a perfect example.)

One effect that Puzder does not include is the closing of many small businesses.  Large businesses can afford the initial investments costs of automation.  They can also afford a bump in health care costs.  Small businesses cannot.  This is one reason why big companies, especially technology companies, support expensive government mandates.  Big business can absorb the costs, while their smaller competitors cannot.  But since 52% of all workers are employed at small businesses*, the effects of company closures are significant on the American workforce overall.

*According to the U.S. Small Business Administration

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