Do Regulations Really
Kill Jobs Overall? Not So Much
by Marian Wang - ProPublica
Sept. 21, 2011) It’s become a mantra on Capitol Hill and a
rallying cry for industry groups: Get rid of the job-killing regulations. In
recent days, with nearly every one of the GOP presidential candidates repeating that refrain, the political echo
chamber has grown even louder. Earlier this month, President Obama also asked
the Environmental Protection Agency to back off more stringent ozone
regulations, citing the "importance
of reducing regulatory burdens" during trying economic times.
But is the claim that regulation kills jobs true?
We asked experts, and most told us that while there is
relatively little scholarship on the issue, the evidence so far is that the
overall effect on jobs is minimal. Regulations do destroy some jobs, but they
also create others. Mostly, they just shift jobs within the economy.
“The effects on jobs are negligible. They’re not
job-creating or job-destroying on average,” said Richard Morgenstern, who
served in the EPA from the Reagan to Clinton years and is now at Resources for
the Future, a nonpartisan think tank.
Almost a decade ago, Morgenstern and some colleagues
published research on the effects of
regulation using 10 years’ worth of Census data on four different polluting
industries. They found that when new environmental regulation was applied,
higher production costs pushed up prices, resulting in lost sales for
businesses and some lost jobs, but the job losses were also offset by new jobs
created in pollution abatement.
“There are many instances of regulation causing a specific
industry to lose jobs,” said Roger Noll, co-director of the Program on
Regulatory Policy at the Stanford Institute for Economic Policy Research. Noll
cited outright bans of products — such as chlorofluorocarbons or leaded
gasoline — as the clearest examples.
That’s supported by recent data from the
Bureau of Labor Statistics, which shows employers attributing a small fraction
of job losses to governmental regulations. In the first half of 2011, employers
listed regulations as the cause of 0.2 to 0.3 percent of jobs lost as part of
mass layoffs. But the data doesn’t track the other side of the equation: jobs
“The key point is that regulation affects the distribution
of jobs among industries, but not the total number,” said Noll.
That point is also echoed by Richard Williams, a former FDA
official who’s currently Director of Policy Research for the free-market
oriented Mercatus Center at George Mason University. (The center has
ties to Koch Industries, an energy conglomerate that’s spent tens of
millions lobbying against regulations . Koch’s chairman and CEO, Charles
Koch, sits on the Mercatus
Center’s Board of Directors .)
Earlier this year, Williams sent
a letter to Rep. Darrell Issa, who’s been soliciting opinions from
businesses, trade groups and experts on which regulations kill jobs. Williams
wrote: “The economic literature suggests that the effect of regulations is
likely small at the macro level. However, at the micro level, the effect of
regulations on job creation and sustainability of particular businesses can be
In a phone conversation, Williams expanded on his point.
“It’s certainly true, as people say, that regulation does create jobs,” he
said. “It requires firms to do something that they’re not doing now, so often
they need to hire.”
But according to Williams, the more important question is
whether the jobs created by regulation are good jobs or more valuable jobs — a
question he says hasn’t been adequately addressed by government analysis or by
Susan Dudley, the former White House regulatory chief under
President George W. Bush and now director of the George
Washington University Regulatory Studies Center, reiterated that point. Regulations
can be counterproductive even if they result in more hiring.
“It would be easy to think of a regulation that ‘created
jobs’ that didn’t benefit society,” Dudley said via email, such as “requiring
that all construction be done with a teaspoon.”
In other words, counting jobs gained or lost is too narrow a
prism through which to evaluate whether a regulation is good or bad. The real
question is whether it improves waterways or lengthens lives or protects the
public as promised.
“The issue in regulation always should be whether it
delivers benefits that justify the cost,” said Noll. “The effect of regulation
on jobs has nothing to do with the mess we’re in. The current rhetoric about
regulation killing jobs is nothing more than not letting a good crisis go to
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