It’s getting harder and harder to get hired into a legitimate job, as municipal, state and federal regulations continue to chip away at the incentive for ambitious individuals to seek a profit – or for job seekers (particularly low-skilled ones) to pursue employment.
That’s a sentence that could have been written decades ago, but the present gauntlet of licensing and regulation (on the startup side), as well as the increasingly rigorous employee vetting process (on the labor side) have clouded the United States’ once-flexible labor environment so that it’s coming to resemble Europe’s or Japan’s.
That’s the conclusion of Steven Davis and John Haltwanger, two American researchers who presented some of their findings to Fed chair Janet Yellen and her European counterparts at an economic conference last month in Jackson Hole, Wyoming. They point to the ongoing ossification of America’s once-fluid labor force, as well as an ever-escalating government regulatory threshold that makes entry into the ranks of the employed more difficult than it’s ever been.
From an analysis of their research in The Economist:
Some of this may be down to structural changes in the economy…But less benign forces are also at work. The spread of occupational licensing, for everything from horse massage to hair braiding, has raised barriers to entry for occupations that once required little or no training. American employers used to be free to sack workers more or less as they pleased, but that “employment at will” doctrine has been eroded somewhat by court decisions that have established an implicit contract between employee and employer. That makes firms less likely to fire people, and therefore to hire them. The authors also finger the information revolution: a job applicant these days could be undone by a criminal record, a poor credit history or even an impolitic Facebook posting, all of which are easy to find online.
On the labor side, that trend is particularly harmful to young, low-skilled job seekers – mostly male. “All this…could explain why the employment rate (the share of the population with jobs) has fallen so much for less educated men in recent decades,” notes The Economist. “[P]olicymakers should not try to increase turnover for its own sake, but rather remove artificial barriers that trap workers in poorly paid, insecure jobs.”
The advent of mandatory, portable, one-size-fits-all health insurance (Obamacare) was supposed to represent the removal of one such barrier, but nothing the government does to improve people’s lives occurs in a vacuum. “In America, Obamacare could improve fluidity by making it easier for employees to change jobs without losing health insurance,” the analysis observes.
“But it could also expand the ranks of part-time workers by requiring employers to provide insurance only for full-time ones. That is something America’s bifurcating job market could do without.”