Question

4. Answer the questions for each of the separate examples of unintended consequence.

(a) To improve road safety, the government requires everyone in a car to wear seatbelt. Yet it turns out the road condition can be more dangerous with this new law. Explain.

(b) To increase the income of low-skill workers, the government requires companies to pay a minimum wage. However, it turns out that this policy decreases the income of low-skill workers. Explain.

(c) Parents send the children to daycare centers and they go to work. They come back to daycare centers to pick up their children in the afternoon after they are off from work. However, some parents are very late picking up their children. To discourage parents from being late picking up their children, daycare centers charge them $1 per minute late. However, it turns out parents are even more late picking up their children after the new policy is implemented. Explain.

1. .

Answer 1

a) The government is concerned about the public safety while driving. The strict following of traffic rules as well as better road infrastructure is necessary for that. However, wearing seatbelts is also important which is relatively easy to implement and responsibility is shifted on the user.
Contrary to the assumption, seatbelt wearing has not improved the situation because this precautionary measure has actually incentivized careless driving among the people and that has worsened the situation.

b) The policy of enacting a minimum wage law for low skilled workers has unintended negative effects. The wage rate is actually the function of market forces. If the government decides the minimum wage that is above the market wage then employer will reduce the labor force and will increase the wage as well as working hours of the retained workers.

c) As a matter of fact, everything in the life can not be measured in monetary terms but monetizing the things gives the tool to measure it up. The parents were late to pick up their children and the daycare center decided to impose a financial penalty for each minute of late arrival. Earlier parents having the sense or guilt that they are stretching the service of the daycare staff. However, imposition of fine has given them a yardstick to measure it and $1 per minute is not being huge amount, parents decided to pay it and arrive late.