Thursday, September 1, 2011

Government Intervention Reduces Social Welfare: Babysitting Edition

Word comes that the California legislature is considering a bill, AB 889 to be exact, which will make it a lot harder to obtain babysitting services. According to The Union,
Under AB 889, household “employers” (aka “parents”) who hire a babysitter on a Friday night will be legally obligated to pay at least minimum wage to any sitter over the age of 18 (unless it is a family member), provide a substitute caregiver every two hours to cover rest and meal breaks, in addition to workers' compensation coverage, overtime pay, and a meticulously calculated timecard/paycheck.
If the bill becomes law, some parents and prospective babysitters who are over the age of eighteen and willing to work for less than the minimum wage will be harmed. It is likely that parents will try to hire younger babysitters or will simply go out less.

It is also likely that the entire industry will become more institutionalized and less personal. There would be economies of scale in handling the regulatory paperwork and arranging for substitute workers. I can easily imagine that parents would then find using babysitting firms more attractive than handling all of the regulatory burden themselves.

The bottom line is that this is the sort of regulation that makes it harder for voluntary exchange to occur, and therefore makes it harder for people to satisfy their ends. As I explain on page 459 of my book Foundations of Economics: A Christian View,
Each time people engage in exchange, they do so because they think they will be better off. In this way the free market tends to maximize the satisfaction of society. Intervention in the market, however, hinders this process and necessarily creates conflict. Instead of an exchange which is mutually beneficial, one party benefits at the expense of another party.

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