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Analysis of the impact of regulation on the supply of labor and opportunities for labor can be divided into two avenues. The first path is to consider employment stability within firms already engaged in business in certain industries. A second route to discuss is the creation of new opportunities either by the expansion of current firms or by entry into the market place of new firms. Economists have been engaged in debate over the role that labor market regulations, especially employment protection laws (EPLs) have had on the market place. (Micco & Pages 2007) (Freeman 2005) Micco and Pages analysis of industry revealed a variation between volatile industires and stable industries that supports regulation as stabilizing employment within volatile industries. Their anlysis also pointed out that the regulations impact the size of an industry which hampers entry of new firms which reduces over-all employment in an industry. (Micco & Pages 2007 p 23) Within conclusions reached utilizing existing economic data researchers have suggested utilizing better variables that will provide more reliable measures of estimating the economic effect of employment regulations besides employment rates and turnover rates.
Other analysts examine how the regulatory structures, such as the EPA, evaluate the social cost estimates impact of regulation on impacted industries. Social cost estimates are obtained from "Partial Equilibrium Models (PEs) of the industry being regulated. (Murray et al. 2000)
PE based estimates have been challenged by economists who have pointed to how environmental regulations interact with tax-induced distortions of the labor market, often referred to as "tax interaction effects" (TIEs). (Murray et al 2000 p 2) (Parry 1997) To use this anlysis the criticism pointed out that assumptions had to be made such as that there were no other market-distortions or that there is a cancellation effect between distortions caused by the regulatory intervention. Murray, Thurman and Keeler pointed out that the TIE literature argues that regarding environmental policy, agriculture policy, trade policy, and other regulation (one can insert labor policy) the other-market effects do not cancel out. (Murray et al 2000 p 2-3) For example, members of the Science Advisory Board, expressed concerns of PE estimates due to TIEs when reviewing the suggested impact that the Clean Air Act would have on social cost believing that they were too conservative.
The above discussion has pointed out some of the complexities in determining the impact that Social Regulations can have on the the current labor force and increasing a supply of labor. Further discussion of the appropriate models and variables used an preparing analysis and making social and economic policy decisions was pointed out in this section of the paper.
Discussion of EPLs and PEs looked at how bureaucratic structures influence the external processes of the market place and influence firms' behavior. The paper briefly switches focus to consider the impact of Regulation on the internal processes of a firm's behavior.
Our discussion will attempt to answer the following question; "Has litigation replaced common sense and compassion in the workplace? Laura Gilbert, writing for the Nat'l Center for Preventive Law, begins an article with the premise that society has a 'heightened awareness of and acceptance of lawsuits". (Gilbert 2010) Gilbert's article points out a need for the workplace to address drastic changes in society and employment law which have prompted increased litigation. In the last decade the shift to "Employment at Will" doctrine has fueled much of this change. The traditional notion of the company man is no longer in vogue as increased instability in the workplace has become the new norm. Down-sizing, mergers, restructuring, plant closings, going South, and so forth are the current buzz words that employees hear in today's workplace. Pressure to multi-task and to be cross-trained to merely protects ones employment interest during down-sizing actions taken to protect the bottom-line have added to an unfriendly workplace. Legal practices, according to Gilbert, are advising the firms they represent to mask their litigious activities so that they are perceived more compassionately. For example, employers should remind employees that their practices are being applied equally to all its employees. The loss of a friendly work place and freedom in the work place is supposed to be accepted for the tradeoff of preventive practices and safety. Very few prudent supervisors will attempt to to enforce a negative sanction upon an employee without first documenting and consulting human resources for advise. Just the mere increased preoccupation with avoiding higher unemployment insurance ratings is evidence that an increase in focus on litigation by employers due to Labor Regulations has also been adopted also by employees who precariously attempt to cling to a swaying career ladder.
Freeman, R., Labor Market Institutions without Binders: The Debate about Flexibility and Labor Market Performance, 2005, NBER Working Paper, #11286, Cambridge, United States: National Bureau of Economic Research
Gilbert, Laura, "Reducing the Litigious Climate in Organizations", article, Nat'l Center for Preventive law Website, (downloaded December 2010) California Western School of Law.
Micco, Alejandro and Pages, Carmen, "The Economic Effects of Employment Protection: Evidence from International Industry-Level Data", [Paper # XXXXX], December 2007, Research Department of Inter-American Development Bank
Murray B., W. Thurman, & A. Keeler, "Adjusting for Tax Interaction Effects in the Economic Analysis of Environmental Regulation: Some Practical Considerations", November 2000, [White Paper], prepared for the U.S. Envionmental Protection Agency
Parry, Ian W.H., Environmental Taxes and Quotas in the Presence of Distorting Taxes in Factor Markets, 1997, Resource and Energy Economics 19:203-220.
Edited by Timothy the Teacher on 12/21/2010 at 5:47 PM EST