Legislating for fairness often results in unforeseen consequences

Posted on April 18, 2024 by Ryan Dahlman

In democracies such as Canada and the United States, leaders and governments have to be responsive to the needs and wants of the people who elect them if they are to stay in power. This is not always easy.

Numerous factors, such as weather and other nations’ actions, are entirely beyond government control. Other issues may demand more natural, human, or financial resources than what is available, limiting what governments can do. However, one avenue available to governments is the enactment of laws. Likewise, in a free society, citizens can utilize the legal system to address their needs and resolve their problems.

However, laws and legal action are not effective tools in every situation. While they may and usually do deal with the initial issue that led to their creation, they often have unforeseen consequences that can be negative.

Fairness is a very important value for Canadians. A significant amount of legal action and the enactment of numerous laws have been in response to the cry: It’s not fair! But we do have to be careful what we wish for.

A lawsuit seeking fairness and gender equality was filed against clothing retailers because they charged for alterations on women’s clothing but not men’s. Men didn’t have to pay to have their pants shortened, whereas women did. The courts ruled that this was unfair and discriminatory against women. As a result, retailers now charge both men and women for such alterations.

In another case seeking fairness, a class action lawsuit is underway against coffee shops that charge extra for non-dairy milks in their coffee drinks. The lawsuit argues that this practice discriminates against individuals who avoid dairy for health or personal reasons, contending that non-dairy milks are not inherently more expensive than dairy milk. However, the suit overlooks that offering several coffee lighteners increases inventory and labour expenses. If surcharges for non-dairy milks are prohibited, increased costs will likely be reflected in all coffee drinks. While this may seem fairer, it may not achieve the desired outcome.

Inflation is a problem that we would like to see come under control. Rising costs and supply constraints on inputs, including labour, contribute to price hikes. Instead of consistently raising prices, some producers opt to reduce the size of their products while maintaining the same price – a phenomenon known as shrinkflation.

One American observer is calling for a law against selling a smaller package at the same price as its larger predecessor. However, such a law would likely be ineffective. If current prices and sizes don’t cover production costs, goods may no longer be provided, leading to reduced supply and further upward pressure on prices.

One current federal government action that will definitely do more harm than good is the decision to drastically reduce the number of foreign students who will be allowed to come to Canada to study.

The reason behind this action is the severe shortage of affordable housing in Canada.

The misguided thinking is that reducing the number of incoming students will free up more housing for Canadians. However, the increase in available housing supply will be negligible. Many students live in dormitories on campus. Frequently, many students share one small unit. Think of your own university days if you studied away from home.

Instead, reducing international students will do more harm than good.

International students represent a significant export industry for Canada. We sell educational services to other countries much like we sell lumber, and the revenue generated by international students surpasses that of our lumber sales. Restricting the number of international students negatively impacts our balance of trade.

Furthermore, restricting the number of international students also adversely affects our universities. These institutions are constrained by the funding they receive from governments, which has not kept pace with rising costs or allowed for expansion in critical areas such as research. Universities also face pressure from politicians and the public against increasing fees. Provincial regulations prevent them from borrowing to develop alternative income sources, such as expanding dormitories. Historically, governments have dealt with this issue by encouraging universities to use the revenue from foreign students to balance their budgets.

Finally, there is the long-term return in human capital that Canada provides by educating non-Canadians. Either they go back home, contribute to the development of their own countries and maintain mutually beneficial relations with Canada, or they stay here, adding the talent that helps us all.

Let us be careful about how citizens and governments use our legal system. Remember, much as we might like it to work, we cannot pass a law against the common cold.

Dr. Roslyn Kunin is a Troy Media columnist, public speaker and consulting economist.

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