Role of Regulation in Hampering the Performance of the Economy
The relationship between regulation and economic growth is quite complex. Regulations may have a positive effect on economic growth by doing away with certain market failures and enhancing economic efficiency. On the other hand, regulations may have a negative effect on economic growth by creating unintended consequences or adverse market distortions, as well as extensive compliance costs. In this paper, therefore, I am going to look at the role that regulation plays in hindering the performance of the economy.
Masses of Americans are locked out of the labor markets. America has long been relying on rapidly-growing young companies to stimulate economic growth and also spread the most recent innovations. A small number of young organizations contribute to the United States employment growth, thereby allocating resources and workers to mushrooming segments of the economy. The government data nonetheless shows that there is a significant slowdown in entrepreneurship. The drop translates into hundreds of thousands of companies and jobs. One of the reasons for this dropdown is the rules and regulations that have led to starting up businesses at generally low rates (Sparshott, 2016).
When regulations or restrictions are put in place without a limit, they may turn out to be disastrous, especially to the economic growth of a nation. A case in point is Ohio, which is one of the greatest regulated states in America. One of the drawbacks of these regulations is that policymakers put new restrictions without remembering to remove the outdated restrictions. This goes all the way to make sure that a nation has thousands of restrictions, some of which are not practical at all. These regulations use a lot of money in order to remain in place, and this severely affects the economic growth of the nation since funds are directed in the wrong direction (Broughel, 2019).
Fortunately, Ohio has adopted a new rule that if a restriction is added, two others must be removed. The state of Virginia also laid out some regulatory requirements that prevent the regulatory creep. The need to cut down these regulations shows how much they impact a nation’s economic growth. The leading president Mr. Trump has been in the run to slow down the growth of the regulations and give the nation an opportunity to grow well and uniformly. In as much as he has succeeded in slowing the enhancement of the restrictions down, he has not fully been able to reduce the existing stock of obsolete and redundant federal instructions that have increased during the previous century. These regulations make it hard for the newer and workable economy, and thus keep lagging the economy (Broughel, 2019).
Another case in point that shows the role of regulations is hampering the economic growth of a nation is California. The nation passed a court ruling that restricted the trucking business, thereby hindering the law’s immediate implementation for the liberated truck drivers. In the United States, a good number of trucking firms employ their own drivers, yet most of them supplement their dealings by using independent drivers; they lease or own their equipment, specifically in port-trucking dealings. This decision by the court greatly pre-empts the state from restricting interstate motor-carriers since it is a test that motors use in determining whether the workers should be viewed as real employees; it hinders the motor-carriers from employing independent contractors as their truck drivers (Smith, 2020).
The court ruling in California was in line with a case filed against truck drivers who hired independent drivers. The Lawsuit claimed that drivers were denied benefits and wages because they got classified as independent contractors. On another level, it is not every trucking company that can perform well without survival means such as the employment of independent drivers. In a bid to fight for the rights and privileges of the drivers, the performance of the trucking companies should also be put into consideration. For the success of every trucking firm, there should be room for different opinions regarding such a ruling and the liberty to carry out business in such a way that it maximizes the incomes. Regulations are, therefore, a hindrance to the performance of an economy in terms of growth (Smith, 2020).
Another role regulation plays in the hindrance of economic growth is that it hinders the growth of the young generation. The restriction by the United States to mandate a $15 an hour pay for every individual does not go well with the poor youths. The restriction destroys entry-level jobs by offering incentives to automate at an accelerated pace. By raising the automation, cities that critically increase the minimum wage abolish chances for the least-skilled employees. A higher minimum wage leads to some job loss for the workers with fewer skills, with probably greater severe impacts than one can comprehend. The loss of these entry-jobs also makes worse the racial disparities in that the drop for the black people is quite high as compared to that of the whites (Puzder, 2017).
There are certain jobs that America cannot dare lose. The number of jobless black youths is higher than that of the whites since they take the best job posts for themselves first. These regulations do not, by any chance, promote the economic advancement of the nation, but rather, they increase the evils in society. If the regulations have to be put in place, then the effects on the different races and also the economy should be greatly considered. If two youths differing in the skin color are all skilled, then the most important thing and what should be focused on is who is more qualified than the other. It would be quite unfortunate for the growth of an economy if they just employed people without skills and left the more skilled ones because of skin color (Puzder, 2017).
The best tool to fight and counter poverty is the use of paychecks. For the youths to be productive in the advancement of the nation is by making sure that they have the required skills so as, to be honest with their jobs. The skills also help them to move up the economic ladder without much struggles, which is, in turn, is an advantage to a whole nation and which also guarantees the youths of better jobs in the future. Avoiding continuous increases in the minimum wage does not necessarily solve all the problems regarding the massive unemployment of the youths. Nevertheless, if the government regulations regarding minimum wage continue to enhance the price of the entry-level labor, automation will rise, there will be fewer jobs as well as fewer opportunities for young people to prosper (Puzder, 2017).
It is also evident that some of the regulations are against the constitutional rights of an individual. Besides, hindering economic growth, they end up punishing individuals for mistakes they never did or even which they did but do not fall under any regulations violations act. Trump noted that the regulations relief would lead to the economic growth of the nation. Agencies ought to thereby review their procedures and align them with the regulatory bill that advocates for fairness during the administrative adjudication and enforcement. This protection and promotion of fairness upon individuals and companies doing business keep the economy waxing stronger since people do not shy of from business out of the fear to violate certain regulations (Slattery, 2020).
In a nutshell, regulations play a big role in the hindrance of a nation’s economic development. Due to the regulations, people are denied access to labor markets, lots of money are used in the existing non-applicable regulations, companies are denied access to employ their desired employees, many youths remain unemployed, and individual human rights are violated. All these lead to the poor performance of an economy.
References
Broughel, J. (2019). A Dark Day for Red Tape in the Buckeye State. Wall Street Journal.
Puzder, A. (2017). The Minimum Wage Should Be Called the Robot Employment Act. Wall Street Journal.
Slattery, J. W. (2020). Trump Protects Your Rights From Regulators. Wall Street Journal.
Smith, J. (2020). New Court Ruling Targets California’s ‘Gig Economy’ Trucking. Wall Street Journal.
Sparshott, J. (2016). Sputtering Startups Weigh on U.S. Economic Growth. Wall Street Journal.