Monday, August 16, 2004

Regulation, Competition, Wages, and Employment

Just a quick note to remind non-economists about the effects of regulation on wages and employment. It's been shown many times, by many economists, that economic regulation raises the costs of doing business, thereby discouraging business formation and reducing competition. The results: (1) Prices are higher because (a) costs are higher and (b) there is less competition. (2) Wages are lower because there is less demand for labor. (3) Employment is also lower because there is less demand for labor.