by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Alex Adrianson of the Heritage Foundation’s “Insider Online” blog highlights a recent analysis of the role an overly intrusive regulatory scheme plays in protecting large corporations from competition.
Ben Gitis and Sam Batkins find:
[F]or every 10 percent increase in regulatory costs in an industry, the number of small and medium-size businesses in that industry falls 3 to 6 percent. The number of large businesses, meanwhile, grows 2 to 3 percent. In sum, we find that regulations cumulatively have a highly regressive effect, substantially reducing the smallest businesses and growing the largest.
The result may surprise some, but the explanation is quite straightforward:
Generally, regulatory costs are fixed, meaning that if all businesses are forced to deal with hundreds of hours of new paperwork, the costs of hiring an additional compliance officer will fall disproportionately on small institutions. Today, there are more than 236,000 regulatory compliance officers and they command average salaries of about $66,000 annually.