We have seen that labour regulation involves the setting both of minimum wages and of minimum working conditions. Labour regulation also requires a monitoring mechanism, which can be via trade unions, or labour inspectors, or both.

Regulation raises wages and conditions as we have seen, so the first thing an economist would look for is displacement of less skilled workers. The old, the young, the inexperienced, the uneducated and the long-term unemployed should have difficulty in meeting the higher levels of productivity required. Our conclusion is that this displacement does occur. A further factor is that taxes rise to fund the welfare arrangements, and taxes are also a burden on jobs. The benefit of regulation is a more egalitarian wage and working conditions distribution, with fewer 'bad' jobs. The cost is fewer jobs and a bigger welfare system. Happiness research shows us that the unemployed would prefer the more jobs/lower welfare combination.

As for the reasons behind policies which raise unemployment, both the political and the legal origin theories have attractions. The political theory has as its basis the universal motive of selfishness. The median voter benefits from good wages and working conditions, and the unemployed are too dispersed a constituency to make much difference to political outcomes. Still, the question arises as to why free-market 'hire and fire' policies are followed in some countries and not others. The median voter tendency is similar in all countries, so some additional factor is required. The legal origin theory has a role to play at this point, by positing path dependence. The legal systems of some countries fell under the influence of the interventionist French (or German) legal tradition, and have continued that way because of the high transactions costs associated with changing. The luckier countries have inherited the English common law, free-market tradition. As long as we defend this tradition, we will be able to reduce long-term unemployment, and maintain a healthy age distribution of employment.