Unemployment and regulation

Here’s a note I sent to a friend’s father, during an e-mail discussion on unemployment:

Regarding unemployment, I think it’s more complicated than technology, women in the work force or immigrants.  At least in the US, we’ve had much greater upheavals over the last two hundred years than we are currently experiencing. Farm work went from 85% of the population to less than 3%. The waves of immigrants in the early 20th century dwarfed those we see today.  Millions of women entered the work force in WW II, only to return home when 10 million men returned from Europe looking for jobs.  At that same time, war manufacturing ceased and government spending was slashed by 60%.

Through all this job creation kept pace with demand, even while the population of the country tripled.

That’s not happening this time and that’s the riddle I’d like to solve.  Why is this recession and the more mild one in 2000/2001 lasting so long and why is the recovery jobless?

I think several factors are to blame. First we have a hang-over from a debt binger through the 90s and 00s.  We massively over built houses and offices and golf courses, so now there is just no demand for the brick layers, painters, mortgage processors and real estate agents who had good jobs during the bubble.  Those jobs aren’t coming back anytime soon.

The second factor is, we’ve built a regulatory thicket which makes it difficult or impossible to start a business.  Where once anyone with a car and a work ethic could run a cab, it now costs 1 million dollars, literally 1 million dollars, to get permission to operate one cab in New York City.  That career is closed to new entrants.  Many cities and states have “Certificate of Necessity” laws which require someone wanting to start a new business to prove the community needs that business, and allows the people he wants to compete against to say “No, we’re serving this market just fine.”  Occupational licensing laws force everyone from hair dressers to florists to spend thousands of dollars and years studying for a licensing exam which will be judged by, you guessed it, the established florists the newbie wishes to compete against.

These kinds of laws gum up the labor market, prevent young people and immigrants from getting a foot in the door and cause middle class kids to warehouse themselves in university for years, racking up debt and avoiding the harsh job market.

What we need to fix this is elbow room.  A place where an ambitious kid with an idea can try his luck and succeed or fail on his merits.  In the few areas of Internet development that have not already succumbed to the scoliosis that effects the rest of society, we can still find the dynamic growing culture that used to characterize industry.  But it is disappearing fast.

About fzinger

I read and I write. I read a lot and I write when I can.
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5 Responses to Unemployment and regulation

  1. Victoria Henderson says:

    Certificate of Need – really? I had not heard of the before… What a crock.

    Great article, Steve. Elbows are highly underrated!

  2. Dave Edstrom says:

    Great article Steve. I would have thought you were kidding regarding the cab drivers, but I was recently in NYC and asked about what the medallion on the cab represented. He said exactly what you did regarding the cost. Amazing….

  3. M. J. Maccardini says:

    Today (Feb 3, 2012), I heard your piece about Nashville music on BBC World Business News. You erroneously characterize the Bluebird Cafe as one of the bars on Broadway where musicians don’t play new, original songs. In fact, the Bluebird is the primary venue in Nashville for showcasing new talent and new songs, and it’s located on Hillsboro Pike, not on Broadway. I think you owe it to the Bluebird to correct your piece before it causes any harm to their business. I’m not connected with them in any way — just someone who has been there and thoroughly enjoyed hearing new music that I wouldn’t have heard anywhere else.

    • fzinger says:

      Thank you for pointing out my error and for taking the time to let me know. I was wrong to lump the Bluebird into the same basket as the Broadway bars. Especially since, the Bluebird is not even near Broadway and doesn’t follow the business model which I was critiquing in the piece. I was deep in blunder territory here.

      While writing this, I’d found out that Webb Wilder, the musician I quoted at the end of the piece, was playing the Bluebird (he was there last night). That made the connection in my head. While hurriedly rewriting the piece after my hard disk failed the night before I was to record it, I just slipped up.

      My apologies to you and the Bluebird. I’ll contact my editor and let him know of my mistake.

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