Illinois can fight poverty by reducing excessive regulations that limit jobs

Data from the Mercatus Center shows Illinois faces a high regulatory burden at both the federal and state level. Research shows these regulations place a disproportionately high burden on the poor, helping to keep them in poverty.

Illinois is one of the most-regulated states in the country, and research shows overabundant regulations are driving poverty in the state. Illinois should work to shrink the regulatory burden if it wants to get serious about reducing poverty.

Illinois ranks as the 10th-most burdened state when it comes to federal regulations, according to the Mercatus Center’s Federal Regulation and State Enterprise (FRASE) index.

At the state level, Illinois’ administrative code contained 279,000 instances of restrictive language, more than 44 other states and Washington, D.C., according to the center.

These rankings aren’t arbitrary numbers, but translate into real harm to Illinoisans, particularly those who are worse off. Research by economist Diana W. Thomas of Creighton University indicates the cost of increased health and safety regulation is most often borne by consumers and employees and can be particularly detrimental to low-income households. Avoiding small risks through costly regulations is disproportionately costly to those with less. Those regulations provide marginal benefit, if any, and are passed on to consumers. Families best know how they should spend their money, so letting them decide what expenses they should shoulder is better than forcing them to pay higher costs resulting from government overregulation.

At the international level, higher levels of business regulation are similarly associated with increased levels of poverty, while lower levels of regulation, particularly those on starting a business, correlate with decreased poverty. Limit new businesses, you limit jobs. This matches the experience in Illinois, where small businesses led the COVID-19 recovery.

Overregulation could be preventing Illinoisans from bringing themselves out of poverty. Mercatus Center analysis found a 96% increase in federal-level restrictions from 1997 to 2017 was associated with a 4.8% increase in income inequality and a 24% increase in poverty in Illinois. That translates to as many as 274,000 people who would not be living in poverty were it not for the increase in regulations over that time.

At the state level, it is reasonable to think Illinois’ high level of restrictions relative to other states would create harm. There are currently almost 1.5 million Illinoisans living in poverty – almost 12% of the population. If the state wants to bring those people out of poverty and put them on a sustainable path to prosperity, they need gainful employment and to have their expenses minimized.

If policymakers really want to tackle poverty in the state, they should look for ways to cut down the number of restrictions in its administrative code as one way to lessen the burden on its worst-off residents.

The state should consider policies such as:

1. Establishing a regulatory budget limiting the amount of costs that can be imposed by administrative rulemaking as had been done at the federal level

2. Streamlining the process for agencies to repeal regulations such as was done in Kentucky

3. Giving the General Assembly’s Joint Committee on Administrative Rules more power to block costly regulations.

It is one thing for government to protect communities from tainted food that can prove lethal. It is another to overregulate people trying to support their families by braiding hair.