Employment Regulations Block Job Growth

by Michael Haberman on March 4, 2011 · 3 comments


Prominent in the news reports today is the unexpected job growth that has just been announced. (So much for the value of government prognosticators!) As I was listening to that news report I also happen to be opening an email from my friends at Seyfarth Shaw LLP. They had sent me one of their One Minute Memos describing a study done by them for the U.S. Chamber of Commerce. This report is entitled The Impact of State Employment Policies on Job Growth: A 50-State Review. (You can find the link to the report at the bottom of this post.) It is a big report and I will admit that I have not yet read the entire thing, but will be.

However, the One Minute Memo did summarize some information and I want to pass this on to you. First, the BOTTOM LINE:

“… if highly regulated states reduced the burden of labor and employment regulation in their state, that reduction would act as a “free” shot of economic stimulus equal to approximately seven months of job creation at the current average rate.”

Seyfarth Shaw did an analysis of regulations on a state-by-state basis and classified the states by their current level of regulation regarding employment and labor. They classified them at Tier I, II or III, with III being the states with the heaviest regulation. Here are those results:

The following states were ranked as Tier I: Good – Alabama, Florida, Georgia, Idaho, Kansas, Mississippi, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, and Virginia.

The following states were ranked as Tier II: Fair — Alaska, Arizona, Arkansas, Colorado, Delaware, Indiana, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Missouri, Nebraska, New Hampshire, New Mexico, Ohio, Rhode Island, Vermont, West Virginia, and Wyoming.

The following states were ranked as Tier III: Poor – California, Connecticut, Hawaii, Illinois, Maine, Massachusetts, Michigan, Montana, Nevada, New Jersey, New York, Oregon, Pennsylvania, Washington, and Wisconsin.

I don’t know about you, but I am not particularly surprised by those states listed as Tier III states.

 The report estimates that job creation could be boosted by 750,000 just by changes in state laws. Just think what might happen if the Federal government would do the same. Yet we are seeing nothing but an effort to increase regulation.

Here is where you can go to download the U.S. Chamber of Commerce report.

If you want to check out Seyfarth Shaw’s One Minute Memo click here.

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{ 3 comments… read them below or add one }

Mark Hornung March 4, 2011 at 2:13 pm

Ahh, it must be spring. We hear the distinct call of the Business Bird– “Oh, if only government would do away with regulations,” it warbles, “we could hire more people and everyone would get rich.”

Malarkey. If you look at the Tier I states, aka “Right to Work” states, they comprise the bottom of rankings for educational achievement in the U.S. Don’t suppose paying teachers the least has any correlation to SAT/ACT scores. Nah. Couldn’t possibly be.

Even when states do make concessions to business, what thanks do they get? The businesses still ship the jobs off to India and China and Vietnam and Mauritania. So are we to believe that the best path to fuller employment is to agree to work for $100 a month?

Lastly, many of the regulations imposed by states are to protect worker health and safety (c’mon, don’t deny it). If the states didn’t provide these protections, are you seriously going to assert that businesses would voluntarily spend the money it takes to ensure not only the health of their workers but also the communities where the businesses thrive? The historical record disproves that.

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Gerry Crispin March 7, 2011 at 11:27 am

I’m not a fan of regulation…until I see the abuses of worker’s rights, outright discrimination, failures to meet implied and real contacts employers should have with their workforce, and safety violations that lead to serious injury and death.

While I’ve had the good fortune to work for extraordinary companies like Johnson and Johnson that understands their responsibility to workers and customers in order to obtain a fair profit, I’ve also worked for the subsidiary of an un-named chemical company, one of the largest, whose president was absent when they gave out moral compasses. Needless to say I was fired for being a loose cannon.

Which regulations would you eliminate? The ones enforcing good manufacturing practices around safety or the ones forcing firms to report on safety quarterly or the ones that won’t exempt accidents by temporary and contingent workers from those reports simply because they are not employees?

That said there are a huge number of BS requirements and onerous, labor intensive data requirements that could be much more user friendly. Why not certify a firm as having the right stuff might and exempt them or lengthen the reporting schedule to reduce the burdens of legislation. There should be an advantage for firms who demonstrate they step up.

We tend to make a law and then figure out how were going to monitor and enforce it. IMHO we should reverse the order and justify how medicine is less onerous than the disease it fixes as the front-end part of the law making.

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Michael Haberman March 7, 2011 at 12:12 pm

Gerry:
An excellent comment. I agree that there does have to be government regulation, because there are, have been and always will be managers and owners who abuse the rules. Just as there are employees who game the systems and take advantage of every possibility. There have always been thieves, cheats, and bad people in all walks of life. It is not going away. There will never be a perfect world. But as you said, we make many laws without taking a good look at what the impact might be. I like your suggest approach.

Mark:
I have not yet read the full report, but I doubt anyone is suggesting we get rid of most laws and let employers, employees and unions run wild. But there are a number of areas where laws can be improved, reporting requirements can be eliminated and paperwork streamlined in order to save money. I disagree with you that most of the laws are passed to protect worker health and safety. Most laws are passed to deal with discrimination and wages.

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