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Explaining Unemployment

Posted by Heather Edwards on November 16, 2010

In a recent Wall Street Journal, Art Laffer asks a question that is sophomorically obvious (but apparently not to the Obama administration and some members of Congress):

“If the government pays people not to work and taxes people who do work, is it really so difficult to see why employment is so low?”

The answer is, of course, that not only is this principle common sense, but it is outlined in the price section of any Econ 101 textbook and has been empirically verified over and over again.

Furthermore, if the total cost of employing a worker including wages, varied taxes, insurance for healthcare, future benefits, etc. exceeds the productivity and benefit of that worker, demand for labor will be low as will workers’ wages.  ObamaCare only exacerbates this problem.

To read the full article and Laffer’s corrective recommendations, click here.

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