Elite Substitution. By Shahid Islam at RealClearMarkets.

Imagine an economy in which high returns come primarily from producing things consumers voluntarily buy. Entrepreneurs search for new products, engineers improve production and investors search for promising companies.

Now introduce an increasingly complex regulatory system.

Those activities do not disappear. But another set of skills becomes more valuable: interpreting regulations, satisfying disclosure requirements, obtaining government permissions, anticipating political decisions and influencing the rules themselves.

The relevant question is not simply whether regulation reduces inequality. It is what happens to the return from creating economic value relative to the return from navigating political and regulatory institutions.

If intervention reduces the return to one form of economic power while increasing the return to another, we may get what I call elite substitution.

The elite does not disappear. Its composition changes.

That has certainly happened in Australia. Which explains an awful lot.

Here’s Robert Gottliebsen in The Australian on employment complexity in Australia, which creates the need for a raft of expensive employment experts and HR people:

In previous generations, outsourcing work overseas and introducing modern labour-saving technology was usually only available to larger, well-capitalised enterprises.

Now, even the smallest family business can send work to India, and modern labour-saving technologies (not just AI) are available on a small scale.

Accordingly, many Australian workers are under threat as never before. Their worst enemy is the complexity of employment. …

World leaders!

The problem is not wage rates or basic conditions, but rather a system that makes hiring and employing workers just too hard. Australia now has one of the most prescriptive and complex industrial relations systems in the developed world. …

Across the 122 modern awards, there are now 205,816 separate rates of pay and on average each award contains 1687 rates. … There are 1900 different employee classifications. Since 2009, the number of pages in the awards rules has grown by 70 per cent, from 5137 to 8739. …

A forklift driver, a fitter or a general hand have somewhere between 60 and 90 candidate awards, and which one applies depends not on the work performed but on the industry the employer is deemed to be in. The same skill, the same task and the same risk attract different minimum rates, different penalty structures and different classification ladders across the economy.

To pay a worker lawfully, an employer must first pick the right instrument from 122, some of which overlap. Having picked one they must then locate the employee among roughly 1900 classifications … and they must do so against documents that have been varied 7568 times since 2009.

And thus an elite class of employment experts was created by regulations. What a waste of time and talent. No wonder living standards are slipping.