The Ugly Truth of Government Regulation: External Training for Companies

“External training for companies,” such as sexual harassment prevention education that the government forcibly mandates, clearly shows how the government’s uniform regulation of the market distorts markets and competition and wastes resources. In other words, the various patterns revealed in the process of implementing external training for companies are a textbook example exposing the true face of government regulation of the market, and the results of government intervention in the market appear this way in almost every case.

Ordinarily, what happens when the government intervenes in the market does not readily become visible. In most cases, the effects or adverse effects of government policy do not appear immediately overnight. Most emerge over the medium to long term as time passes. Because of this, it is difficult to establish beyond doubt the causal connection between a particular policy and a particular outcome. This situation encourages the government to overuse regulation and also provides it with an excuse to shift responsibility for the adverse effects or side effects of its policies onto other causes or other economic actors. In that respect, this issue of external training for companies can be seen as a rare case in which the causal relationship is relatively clear.

The very fact that external training for companies is enforced by the government means that it is, in our society, a nonessential good or service. Of course, there may be companies that need such training. But forcing all companies to conduct external training is, for most companies other than a few exceptions, equivalent to forcing them to purchase a product that is neither truly necessary nor urgent.

From the standpoint of companies that are being forced to do it, they have no reason to care about the quality, content, or effectiveness of the training. All they need to do is “kill time” or merely give the appearance that they conducted or received the training. Accordingly, they come to prefer instructors who can finish the training in as short a time as possible and who can lecture in a way that is simply not boring, regardless of the content or purpose of the training. Instructors who can deliver, and seek to deliver, expertise and substantive content are inevitably pushed aside.

On the supply side, where providers understand this situation well, there is no need to prepare lectures rich in expertise and substance or to hire instructors who can deliver them well. In the end, “defective products” far removed from the training’s purpose come to dominate the market. The practice of instructors coming to conduct training and then selling insurance or other products as an add-on, and the problem of training companies for instructors engaging in so-called “certificate sales,” issuing certificates as long as people pay money and fill the required hours, are ultimately nothing more than distortions of the market and competition caused by government regulation.

Both forcing the purchase of a product and producing goods tailored to this kind of “forced demand” inevitably distort the social allocation of resources and waste resources. Companies’ time and effort, as well as instructor fees, are being wasted, and the time and effort of vast numbers of human resources are also being squandered producing and supplying things that have no social value.

Moreover, the market is seeing so-called adverse selection, in which “bad money drives out good.” Adverse selection is usually regarded as a market failure, but in this case it has nothing to do with market failure. It is a typical case of “government failure” arising from the distortion of the market and competition through government coercion.

The solution is simple. Instead of the one-size-fits-all regulation called “mandatory education,” companies should be given back the right to choose the means for achieving the objective. Why should there be only one way to achieve the government’s intended educational purpose?

Hyukchul Kwon, Vice President, Center for Free Enterprise (CFE)

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Original title: 정부 규제의 민낯, 기업 대상 외부교육

Author: Hyeok-cheol Kwon

Date: 2019-11-20

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=23&idx=22068