Inflating Costs Doesn’t Grow the Economy

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If a company takes on a project that comes with specific terms, such as paying employees a certain amount, it should follow those terms.  That said, Governor Gina Raimondo’s statement concerning a government contractor who paid his employees less than the prevailing wage required for such jobs illustrates very well the economic thinking behind Rhode Island’s back-of-the-pack economy:

In announcing the settlement, Raimondo said it’s the first significant action of her new Workplace Fraud Unit, which will focus DLT’s effort on dishonest companies, investigate wrongdoing and enforce worker-protection laws.

“We’re going to go after companies that cheat because breaking the law not only hurts workers, it also hurts companies that follow the rules, pay proper wages and help grow the Rhode Island economy,” Raimondo said in a statement.

Think about the logic, here.  Raimondo is spending taxpayer dollars to enforce a labor requirement that makes government projects cost more than they otherwise would, and she insists that doing so will help to grow the state’s economy.  Put differently, the market sets a certain price for the type of work that Cardoso Construction’s employees do, and the government insists that it isn’t high enough.

As I’ve stated before, money is just a unit of measurement and a signal of value to the larger economy.  Forcing it to flow to a particular place to which it otherwise would not go means that it can’t go to something else, either because the system places less value on that something else or because the individuals who would put it to a different use can no longer access it.

It’s been a while since I looked at taxpayer migration data for Rhode Island, but the picture hasn’t really changed.  In the three years from 2010 to 2013, Rhode Island lost 6,613 taxpayers (accounting for about 19,634 people), who took with them $915 million dollars of adjusted gross income.  (That’s on a net basis, so it does include people who moved in the other direction.)

That’s almost a billion dollars in annual income of people who found somewhere else better to live.  Whatever it was that led them to leave, we can be reasonably sure that it wasn’t because Rhode Island government wasn’t taking enough money away from them in order to support laws that take even more away from them unnecessarily.



  • Forcing it to flow to a particular place to which it otherwise would not go means that it can’t go to something else, either because the system places less value on that something else or because the individuals who would put it to a different use can no longer access it.

    That’s why I love the minimum wage argument so much — we should (artificially) increase the cost of labor so the economy can grow — because it ignores TANSTAAFL. Money that goes to pay the workers more (ignoring supply/demand and without a corresponding increase in productivity) can’t go somewhere else. Only in the best case scenario is the transfer a wash.

  • Conservative Marine

    March 26th, closed on a house in Rehoboth, MA. Buh-bye RI. 😀

    • ShannonEntropy

      I officially became a Mass resident back in 2011. That “move” has saved me so much money that our place there is basically free

  • Mike678

    One does have to protect the Dem base–the unions.

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