Do Regulations Kill Jobs?

According to House Speaker John Boehner, “job-killing regulations… are strangling employers all over the country” and contributing to the nation’s persistently high rates of unemployment. Last month, President Obama reinforced this theme by asking the Environmental Protection Agency to back off more stringent ozone regulations, citing the “importance of reducing regulatory burdens” during trying economic times. In recent weeks, several independent observers have examined this charge in order to assess the evidence on the impact of health, environmental and other regulations on employment.

Writing for Pro Publica, Marian Wang interviewed several economists who have studied the issue and concluded that “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.” Wang also cites a recent Bureau of Labor Statistics survey that shows that in the first half of 2011, employers attribute regulations as the cause of 0.2 to 0.3 percent of jobs lost as part of mass layoffs, a negligible fraction.

Supporters of regulations that protect public health offer two responses to the charges of job loss. First, they say, many regulations simply shift jobs from one sector to another, sometimes actually increasing employment opportunities. For example, the requirement to clean up contaminated brownfields, abandoned toxic waste dumps in populated areas, created thousands of new jobs in environmental remediation. Thus, any assessment of the impact of regulations on employment must examine both jobs lost and jobs created. To look at only one side of the equation is like saying in the early twentieth century the auto industry killed jobs by putting carriage drivers out of business.

The second defense of regulations is that they achieve social benefits – improved health, for example, or reductions in premature mortality, that outweigh their costs. In a recent op-ed column describing opponents of public health regulation, veteran consumer activists Ralph Nader noted, “These same Republicans get in their cars with their children and put on their seat belts. Out of sight are the air bags ready to deprive them of their freedom to go through the windshield in a crash.” Nader went on to observe, “The jobs these regulations may be ‘killing’ are those that would have swelled the funeral industry, or some jobs in the healthcare and disability-care industry. On the other hand, by not being injured, workers stay on the job and do not drain the workers’ compensation funds or hamper the operations of their employers.”

Earlier this month, Public Citizen issued a report about five regulations that spurred innovation and a higher quality of economic growth. The report noted that ‘when federal agencies implement rules for efficiency, worker safety, or public health and welfare, companies need to reformulate their products and services to comply. And so begins good ol’ American competition. To comply with federal standards, companies need to invest in research and development, which often yields to new products and systems that both solve public policy problems and, often, boost business. The result? A brighter idea emerges.

The bottom line: an honest assessment of regulations requires a comprehensive look at their benefits and costs. As Roger Noll, co-director of the Program on Regulatory Policy at the Stanford Institute for Economic Policy Research, told Wang, “The issue in regulation always should be whether it delivers benefits that justify the cost. 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 waste.”

Source: Public Citizen