Thursday, December 13, 2012

Assessing the impact on employment of regulation

How to think about the impact of regulation on jobs.

Observation: There is a difference between productive jobs and unproductive jobs, and a lot of the jobs caused by regulation do not increase the fundamental wealth of our country and therefore do not ultimately improve our standard of living.

In the realm of government schools, we can hire teachers to teach children effectively in the classroom, or we can hire more administrative staff to make sure that the school complies with ever greater regulation. Both would put wages in the economy that would then be spent on food, but only the first has the delightful knock-on effect of teaching others how to create more wealth. The spent wages of the administrators add little or no value until they land in the hands of somebody else who will create wealth with them.

In the private sector, we can hire an engineer to design a new medical device, or an internal auditor to support our "internal controls" assessment required under Sarbanes-Oxley. We can add a programmer to improve our service to our customers and perhaps lower their own compliance costs, or an accountant to track the tax attributes of every product we sell.

You get the point.

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