There has been a bit of chatter about this article in the Wall Street Journal about the costs of employment. Here, for example, is Mark Perry. The cost of providing a job that pays $44,000 (gross) and provides $12,000 in benefits is much, much higher than it at first appears. Enthusiasm for ever-larger piles of mandates on employers is only going to make this worse. Here are a couple of quick thoughts based on my recent experience:
1. What is the “regulation” elasticity of business formation? I’m guessing it’s substantial: small increases in the probability of prosecution, fines, etc. and other imposed costs probably lead to large reductions in the rate at which new enterprises form. I would also guess that this leads to larger, more concentrated firms. Wal-Mart, for example, has a small army of people who can deal effectively with the changing regulatory environment. Mom & Pop’s Sodas and Sundries probably doesn’t.
2. A couple of quick glances out the window indicate that the costs are non-trivial. More than once, I’ve noticed that when I’ve wanted to buy a good or service, it has been out of stock, the person on the other end of the phone line hasn’t been able to help me, or the hours of some of the brick-and-mortar establishments at which I’ve tried to shop have been less than convenient. These aren’t world-ending or life-changing annoyances and inconveniences, mind you, but it’s important to remember that they represent foregone opportunities for people to enjoy gains from trade. The costs I’m bearing are pretty small, but when you add them up over (say) the entire US or world population, you’re talking about an enormous number of attempts by people to better their own circumstances that are thwarted by regulations, taxes, and what have you.
