We're against regulation because it keeps the poor poor


There's a certain absurdity to the regulatory state around the world. In some US states they insist that you go get a 3 year cosmetology degree in order to be allowed to legally work as a hair braider. We here in Britain shouldn't laugh too loudly: We've told that one of us broke the law by doing a bit of simple electrical work in our own kitchen just recently. That is reserved to those who have the correct chitty from government. But why is it that we are against such regulation of who may enter an industry, who may offer their services? Because, quite simply, it keeps the poor poor:

We examine the relationship between entry regulations and income inequality. Entry regulations increase the cost of legally starting a business relative to the alternatives—working for someone else, entering illegally, or exiting the labor force. We hypothesize that such regulations may cause greater income inequality, because entrepreneurs at the bottom rungs of the income distribution may have relatively greater difficulty surmounting costly barriers to entry. Combining entry regulations data from the World Bank Doing Business Index with various measures of income inequality, including Gini coefficients and income shares, we examine a pooled cross-section of 175 countries and find that countries with more stringent entry regulations tend to experience higher levels of income inequality. An increase by one standard deviation in the number of procedures required to start a new business is associated with a 1.5 percent increase in the Gini coefficient and a 5.6 percent increase in the share of income going to the top 10 percent of earners. Although we cannot eliminate the possibility of reverse causality, we are unaware of any theory that posits that income inequality causes entry regulations.

We're happy enough with the idea that a lorry driver should have some proven ability to drive a lorry before being let loose with a 40 tonne behemoth. But much less certain that we need quite as much restriction on who may do what as we currently have. And why not decide to provide that ladder up out of poverty and inequality by making it easier for people to get those first and entry level jobs?

Or, as we never tire of saying, it's surprising how often the solution to government identified problems, like poverty and inequality, is to stop government doing the damn fool things it already does.