Wage and Price Controls

Summery: The government published an incomes policy, which is mainly designed to secure a lower rate of price inflation by reducing the rate of increase in labour costs. “In other words, it is a policy of wage restraint, based on the view that it is the push of labour cost which leads corporations to raise their prices”. The policy will create more unemployment, and it has come increasingly to accompany high rates of unemployment and cuts in government spending on social service to induce deflation. The incomes policy is not designed to reduce our current high rate of unemployment.

Connection: In chapter eight there is a section talks about wage and price controls. The changing of price is an important aspect of the free-market system. It can provide information that helps both buyers and sellers to make decisions. When the price of a product increase, buyers may respond by cutting back on their purchases; sellers may see price increases as a signal that more of the product should be offered to the marketplace. If there is no control of that price changing, the market is going to break the balance. This may affect the whole country

Reflection: I think Harmonized Sales Tax (HST) is a kind of price control. Actually this is the way that the government earns more money. Before this, we could only pay PST which is 7% of the product’s price. Now we need to pay 12% of the product’s price, which is HST. I guess this is the way the government controls the prices. They rise up the prices directly by published the law, so that no one can refuse it. I really don’t think HST makes the economy of British Columbia better, because if all the products’ prices increase, people will buy fewer things. Therefore the economy falls down again.
Article: http://www.connexions.org/RedMenace/Docs/RM1-Wage&Price.htm