Suppose that Congress and the President are concerned that some individuals die
ID: 2495779 • Letter: S
Question
Suppose that Congress and the President are concerned that some individuals die without making adequate plans to financially provide for their families after their death. Their efforts to reduce this problem by introducing personal savings accounts into the Social Security System seem dead in the water. So instead, they pass legislation that mandates that all employers must provide their employees with a life insurance policy that is worth at least $100,000 (at no cost to the employee). What are the likely effects on employee well-being of this mandate?
Explanation / Answer
Basic objective of the government of a country is to maximize welfare. In order to achieve it government has observed that many workers are dying without providing adequate money in their savings account for future generation. It will cause hardship to survivors. Existing social securities measuers are not adequate to cover it. So a rule has been passed by Government. As per this rule, all employers will provide an Insurance of at least $100,000 to employees at their own cost.
It will increase cost of employment and so the cost of production. But laborers future will be secured to some extent. They will be protected from future uncertainty. Thus more laborers will be encouraged to work in industries. It will increase the supply of labor in the labor market. Due to better financial security they will concentrate more in their work. As a result productivity will improve. It will compensate employers extra cost on this account to a large extent.