Wage Supports=High Unemployment
by Vince?Daliessio
In Economics 101, we learn that the price of a good, when set at the intersection of supply and demand, will clear the market, i.e.; all the goods will be sold. This is elementary.
However, politicians, and wards of the welfare state such as union members, welfare recipients, and the unemployed deliberately ignore this when the price in question is the price of labor.
For example, unemployment in the former East Germany is over 20%. This is insanity. The former East Germany, with its relatively poor population, low basic cost of living,?fairly high levels of literacy and education, and its?reunion with the West,?should have become at least as economically successful as its neighbors Poland or the Czech Republic by now, and it hasn't - it's a basket case. ?
Clearly, something is keeping the economy from providing jobs for all these people (HINT: it's called the financial overhead of the German social-welfare state). This financial overhead greatly increases the price?an employer pays for labor. Yet the German states of the east are nearly in open revolt over a small reduction in long-term unemployment benefits!
It does not take an economist to see that?any reduction in the cost of employing workers will result in the employment of more workers. Yet these people oppose any reduction at all, 20% unemployment or not. The economic argument is lost on people who have become inured to the idea of welfare.
In this country, one of the only issues of any importance actually being addressed in the presidential campaign is our "high" unemployment rate of 5.5%. Remember Economics 101 - the price of a good, (in this case, labor,) when set at the intersection of supply and demand, will clear the market. All the goods will be sold (in this case, all the people will be employed).
However, politicians, and wards of the welfare state such as union members, welfare recipients, and those?unemployed who receive unemployment benefits deliberately ignore this. Any attempt at reducing the overall cost of employing people will be bitterly resisted. People who live in whole or in part at the expense of others will always resist any reduction in the size and scope of the welfare state, regardless of how much better off the country would be.
This is Politics 101.
