An Introduction to the Effect of Regulation on Employment and Wages

from the book Regulation and Economic Opportunity: Blueprints for Reform

Executive Summary

Debates about regulation often include claims that regulation takes away job opportunities and reduces wages. Yet, regulation can also create jobs and increase wages. As regulatory economist James Bailey discusses in this chapter, regulations can create jobs, like compliance officers or policing agencies. So the effects of regulations depend on how and where the rules apply. Bailey’s key findings include:

  • Different forms of regulation have different effects and need to be analyzed accordingly, and reformed when their actual results do not match their intended effects.
  • The overall effect of regulation often slows business growth. For example, doubling the level of regulation may reduce hiring by about six percent.
  • The marginal effect of regulation matters most often. That is, the next additional regulation should be subject to cost-benefit review to ensure it serves consumers’ interests at a reasonable cost to entrepreneurs who must pay their costs.
CGO scholars and fellows frequently comment on a variety of topics for the popular press. The views expressed therein are those of the authors and do not necessarily reflect the views of the Center for Growth and Opportunity or the views of Utah State University.