Regulation Nation and Jobs

Does over regulation have economic impacts? Does over regulation cost jobs?For me, it would seem to be obvious that the answer to both questions is yes. But, if you were to Google “over regulations kill jobs”, as I did this morning, you would find some articles that agree with me but you would find many more articles that take the position that regulations have minimal  impact on jobs. To say the least, I was surprised. My personal experience in the corporate world say otherwise.

Fox News had a panel discussion a couple of weeks ago that in part dealt with this question:

ARE WE GETTING PROOF THAT GOVERNMENT REGULATIONS KILL JOBS IN  AMERICA?

The link has both a video of the panel discussion and a transcript. I am going to focus on just what the very first commenter had to say:

TRACY BYRNES: Cheryl, you said it. One hundred and  sixty one thousand dollars a year it costs businesses. Those are multiple  employee salaries. Right now small businesses are paying an average of 11  thousand dollars per employee just to follow all of these dumb rules, and the  administration plans on instituting another two hundred and nineteen regulations  this year. Lord, all these businesses do is spend time complying with  regulation. What about innovation and expanding the business? There’s no time  for that and there’s certainly no money left for that. (Emphasis added)

Look again at the part I put in bold and underlined. $161,000 per year for a business? Really? I’m not buying it for a moment. My guess is that, for many corporations, just to comply with EPA, SEC, OSHA and, IRS regulations, the cost per year is ten to twenty times that amount. Let me relate some personal experience from twenty-five years ago.

In 1986 I was General Manger of one of three divisions of a moderate sized mining corporation. the cost for my division alone to comply with just the EPA regulations was around $500,000 per year. Then there was the costs of complying with the MSHA (the equivalent of OSHA for the mining industry) regulations, SEC regulations( internal and external audit costs) nd the cost of compiling all the information the corporate offices need to do their IRS fillings, my divisions total cost for regulatory compliance was around $1,000,000 per year. So, with three divisions, this moderate sized corporation was spending about $3 million per year on regulatory compliance twenty-five years ago. Imagine what it must be today.

I am not suggesting that here shouldn’t be any regulations. As a society, we are all subject to regulation in the form of the criminal and civil laws, which we must comply with. But, complying with criminal and civil laws (regulations) cost us very little and we don’t have to file tonnes of paper work, with the exception of IRS fillings, to prove we are in compliance with the criminal and civil laws. But in the business world there is a tonne of paper work that must be filed with government on a regular basis.

There can be no question that regulations add significantly to the cost of doing business in this country. Regulations do have an important impact on the economy and, therefore, jobs. I’m going to leave you with this Fox News video that I borrowed from the great Truth in Exile blog. It is an interview with Peter Schiff that I think you will find interesting and clearly demonstrates how regulations have affected his ability to hire people.

 

 

Well, that’s what I’m thinking. What are your thoughts?

 

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29 thoughts on “Regulation Nation and Jobs

  1. I don’t mean to pile on, but read this at Power Line today: http://www.powerlineblog.com/archives/2011/09/this-weeks-applied-hayek-epa-edition.php

    Steven Hayward points out: “the design of the Environmental Protection Agency to double its budget, and to increase its number of employees more than tenfold, from the current level of about 18,000 to more than 230,000, over the next four years. And this just for one single program: the greenhouse gas regulations under the Clean Air Act.”

    Nobody can tell me that jobs won’t be lost as the EPA forces compliance with this act, utilizing it’s quarter of a million person work force. Those people have to justify their existence, so they will be a pain in the ass.

    I don’t recall precisely the figure of the cost of regulation to the economy, but it is something on the order of $1.7 trillion dollars. This is all UNPRODUCTIVE use of capital. If that kind of money isn’t spent on compliance with regulations, it’s invested in R&D, expansion, or it might even be available for increased salaries for employees.

    That’s the nub of it that has to get through to people: the difference between unproductive uses of capital, such as regulatory compliance, and utilizing capital for productive purposes. The government forces capital to go to unproductive uses, and by definition that harms job creation and wealth production.

  2. Another great article on the same subject at Hot Air: http://hotair.com/archives/2011/09/27/a-memo-to-europe-on-idled-resources-and-the-opportunity-in-meltdown/

    J.E. Dyer says: “Don’t forget the words idled resources. I’m not talking here solely about capital available for investment, although I’m talking about that too. I’m talking about how much more you could accomplish, and how much more you could save and buy (with cash), if the government didn’t keep driving up your basic costs (and, indeed, the cost of everything else) with regulation, while diverting 30-60% of what you’re worth to your employer in the form of taxes, mandated benefits, and “social investment.””

      1. How about paralysis due to the KNOWN actions of government? Combine the known and the unknown and you get the idle resources J.E. Dyer is talking about. And the known actions of government cause unproductive use of capital. Do you suppose Obama and his supporters have any idea what any of that means or what the consequences are to an economy? A quick glance at Greece and Europe in general, as well as a quick perusal of our own economy at the moment, should give them a big fat hint.

  3. It is hard to quanitfy the amount time and distraction that occurs as well. Worrying about whether one is in compliance. Having the inspectors show up unannounced and expecting the world to stop. Knowing that they had to find “something” to justify their existence. That was my experience.

  4. OK. I just went out and googled “innovation regulation” and the results were sickening. A cacophony of liberals who wouldn’t know free enterprise if it bit them on the ass twisting facts around to try to prove that more regulations spur more innovation.

    The prize for muddled thinking goes to The Economist (a formerly very good magazine). They pointed to the boom in innovation in the US telecommunications industry, claiming is was caused by more regulation. They actually called the US governrment breaking up monopolies “regulation.” Tendentious, so say the least.

    1. Seriously? (regarding the phone companies)

      Remember the BP oil spill? I read a great article on that (may have been a Power Line) where the point was made that regulators can’t keep up with new technology created by private industry–where actual problem solving takes place. The regulators have to be taught by the people they’re supposed to be regulating. That is, of course, when they are far enough advanced in their thinking that they allow new technologies to be used. We saw the opposite of that happen when the clean-up technology that Kevin Costner brought to the area couldn’t be used despite oil slicks heading for land. I think that whole BP spill was a beautiful example of how incompetent regulation is, both in preventing bad things from happening, and having the flexibility to find solutions to the problem at hand.

  5. I wonder how the regs affected the big mining operations. Did they have loopholes? Or did their large size make compliance less of a burden for them than smaller operators. I’ve been noticing that the big corporations seem to write regulation in this country to benefit them. Their Washington men lobbyists then pass it on to Congress, where it is cut and pasted into bills. The most cooperative Congressmen seem to be awarded with positions in corporations after they retire. This is the pattern I seem to be gleaning from my surveying of this stuff, anyway.

      1. No argument there. Cronyism is alive and well like never before. It has been around for years, of course, but now it is right out in the open. The new term is Public Private Partnership and it goes right down to the levels of local government.

  6. The only part I disagree with is (unsurprisingly) your observation that the cost of civil and criminal compliance is minimal. There are a host of costs involved with legal compliance. Warning labels are an example; how many companies apply silly ones out of fear of a lawsuit?

    Another example is products liability. It easiest to see in the pharamceutical industry. Our lax standards and generous judgments in PI law lead to an enormous cost of pharmaceuticals in the U.S. That’s a big reason why drugs are more expensive here than in other countries such as Canada. Sure, the costs get passed on to the consumer, but that’s true of regulations as well.

    1. The point I was trying to make and obviously didn’t do very well, was that all citizens are subject to civil and criminal law but we don’t have to spend much of our time and money verifying to ourselves that we are in compliance or proving to the authorities that we are in compliance. We only have to do that if an agent of the law first charges us for non-compliance. Companies , on the other hand, spend a lot of time and money verifying to themselves that they are in compliance with a multitude of regulations and they also must file periodic reports with agencies showing that they are in compliance.

  7. There is no doubt that the burden of over-regulation has been a huge drag on the economy and one has to wonder if this is part of Obama’s plan because he can’t not understand that what he is doing is making matter worse.

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