November 18, 2013

When Businesses Are Hiring for the Wrong Reasons

Keith Hall

Former Senior Research Fellow
Summary

Businesses have increased the hiring of compliance officers in recent years to help manage the growing number of complex federal rules and regulations. While increased hiring is generally welcome news in the current labor market, it’s important to realize that a regulatory system that prompts the private sector to bring on employees whose sole purpose is to evaluate conformity with laws and regulations reduces productivity, raises the cost of production and has a negative impact on the economy.

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Businesses have increased the hiring of compliance officers in recent years to help manage the growing number of complex federal rules and regulations. While increased hiring is generally welcome news in the current labor market, it’s important to realize that a regulatory system that prompts the private sector to bring on employees whose sole purpose is to evaluate conformity with laws and regulations reduces productivity, raises the cost of production and has a negative impact on the economy.

Unfortunately, proposed government regulations often ignore the economic cost of job loss in the regulated industry. For instance, if an agency adopts a regulation that increases the costs of energy production, energy companies have to either lower production, raise prices, hire fewer workers or consider some combination of the three.

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