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Obsolete Laws Stifle Job Growth

Testing canning equipment at Triangle Brewery in Durham, N.C.

Photograph by Chuck Liddy/Raleigh News & Observer/MCT via Getty Images

Testing canning equipment at Triangle Brewery in Durham, N.C.

Most states have obsolete and counterproductive laws and regulations—throwbacks to the Depression Era and earlier—that discourage entrepreneurship, increase business costs, and harm job creation.

Many of these laws are probably benign and no longer enforced. Some create hardships for businesses trying to make a go of it in a tough economy.

Democratic Governor Mark Dayton of Minnesota, during the state’s abbreviated legislative session this year, challenged state lawmakers to clean up the books in an effort to “make state government better, faster, simpler, and more efficient.”

Broom in hand, Minnesota legislators swept away some 1,175 laws and amended others. They reduced for example, the amount of time the state bureaucracy has to approve most business-permit applications, from 150 days to 90 days.

It wasn’t a clean sweep by any means, the governor admitted afterwards. But it was a good start. Connecticut did something similar a few weeks later, eliminating nearly 1,000 pages of obsolete rules and regulations. Governor Dannell P. Malloy, also a Democrat, signed the measure on June 11.

Imagine how much more efficient the economy would be if every state and the federal government would do likewise. The U.S. economy today has enough problems without having to contend with laws that may have made sense in the past, but do not today.

For example, as Farran Powell of CNNMoney reported recently, several states have clung tenaciously to laws limiting the alcoholic content of beer to 5 percent (or thereabouts). Repeal these outdated Prohibition-era restrictions—as Mississippi did two years ago—and a craft brewing industry emerges.

North Carolina repealed its antiquated beer laws in 2005. Today, Powell reports, “The North Carolina Craft Brewers Guild estimates that it’s a $700 million industry supporting over 10,000 jobs.” The city of Asheville, N.C., is home to some 18 craft breweries, earning recognition as the “Napa Valley of beer.”

The same is happening elsewhere. In 2009, Powell reports, there was just one brewery in Alabama. Today there are 29.

Laws and regulations affecting suds are not the only ones that need updating. Massachusetts, for example, still clings to antiquated Blue Laws that prohibit “any manner of labor, business or work” on Sunday. There are exemptions, of course, but the fact that such laws are still on the books does not earn the Bay State points in the “business friendly” category.

An additional example: the New York Franchise Act. Simply put, if you own a Burger King (BKW) franchise in Ithaca, N.Y., and want to sell it, you need the state’s permission; New York State, more or less, has veto power. In most cases, such statutes apply only to the sale of franchises within the state on the assumption that such sales affect the interests of state residents and business. New York’s busybody statute, however, requires a New York franchise owner to register sales offerings, even if the franchise being offered for sale is in Toledo, Toronto, or Timbuktu.

As Republican Senator Marco Rubio of Florida recently wrote in the Tampa Bay Times, “We can’t allow outdated, anticompetitive regulations—at all levels of government—to stand in the way of progress and opportunities for our people.”

We need to get rid of them.

To that end, every political jurisdiction in our country needs to conduct a periodic review of its regulations and statutes and then give the boot to those that no longer fit the times.

Harold L. Sirkin is a Chicago-based senior partner of The Boston Consulting Group (BCG), a professor at Northwestern University’s Kellogg School of Management, and co-author, most recently, of The U.S. Manufacturing Renaissance: How Shifting Global Economics Are Creating an American Comeback (Knowledge@Wharton, November 2012).

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