Part of the problem--and I suspect it's only part--is that with so much regulation, it's very hard to start your own business. It's also very difficult to find work, because govt. regulations make it so hard to fire anyone. In Germany, it's actually illegal to set yourself as a shoe shine guy, because it's considered "undignified" work!
"and I suspect it's only part--is that with so much regulation,"
Actually, regulations are a very big part of the problem. The worst laws are the ones that make it difficult to lay workers off. That guarantees that nobody wants to hire anybody.
When I was living in Germany years ago, it was illegal to have an ice cream stand in the winter, because you "shouldn't."
I used to go to a pool that closed at 7:30. One time I arrived shortly before 7:00 and tried to pay my money and go in. No, it wasn't allowed. The pool was closing in 30 minutes.
I explained that I knew that, I was going to pay full price, go in, do my laps and be out at 7:30.
No. It was illegal to enter the pool less than one hour before it closed.