The Compassion of Competition

Those who promote strict labor regulations always couch their arguments in terms of compassion for society’s underdogs. Mandated benefits from employers are meant to help workers struggling to make ends meet. Licensing requirements on businesses are meant to protect the unwary consumer from greedy snake oil salesmen, eager to take advantage. It all makes for good TV. But like most good TV, the truth is hidden behind a thick layer of stage makeup and soft focus. The very regulations that are supposed to help the little guy actually have the opposite effect.

The key to understanding this, is the concept economists refer to as “barriers to entry.” In short, this means the difficulty for a worker to enter a particular profession. High wages and full benefits are of no use to the unemployed. What matters to most low-income Americans is to get a job in order to build the experience and skills necessary to improve their situation in the long term.

In industries with low barriers to entry, job opportunities are plenty for those who need them most, and the competition inherent in such industries provides lower prices for consumers as well. Thus, at both the supply and demand ends of the spectrum, low-income families reap the bulk of the benefits.