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Job-Killing Regulations: Busting the Myths

| September 22, 2011

it ain't regulating itself, particularly when much of it is hot air about regulation. (Racine)

It ain't regulating itself, particularly when much of it is hot air about regulation. (Racine)

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 [PDF] 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 choloroflorocarbons 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 created.

“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 [PDF] 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 great.”

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 academic research.

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 waste.”

–Marian Wang, ProPublica

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6 Responses for “Job-Killing Regulations: Busting the Myths”

  1. Bigfoot says:

    The photo shown is not a typical industry polluter; but a disingenuous effort to arouse hate at industry. Most of any clouds you see at power plants is steam from their scrubbers, which use treated water inside the stacks to remove the polutnents .

    As tto the job killing cost if electric goes up on ALL it is surely a JOB killer that lasts forever.

  2. Lauren says:

    I see an article once again quoting academics. Why don’t you do a survey of all the Florida businesses, or those right here in Palm Coast and ask them?

    What do academics know about business? I think maybe most people don’t trust them anymore. Just look what they are doing to our economy.

  3. Outsider says:

    Exactly, Lauren! This gets right to the main problem we have with our economy: it’s being run by academics who have no real world experience, who rely on textbooks and professors’ theories as to what should work in formulating policy. The result: their policies don’t work and they have no clue what to do next. On the macro scale we see this in the ineffective use of fiscal policy in an attempt to “stimulate” the economy while refusing to address the real issues holding the economy down: lack of confidence and uncertainty as to what the government will do next. I have a friend who has a small contracting business administering a government program. He subs out the work to one-man-does-it-all contractors. The government sent him a letter on Wednesday saying he and all of his subs had to attend a seminar two days later to learn how to fill out a form. It was 75 miles away, and everyone would have had to take a day off from work to do it. He told this bureaucrat that neither he nor his subs could afford to lose a day’s work and that he already learned how to fill out the form online. The bureaucrat’s response? “Well, can’t you send someone from your office to take the class?” There is no office and no “someone’ from the office to send since they are all one man operations. Talk about out of touch. Again, in the bureaucrat’s world, there are dozens of people available to shuffle paper all day long, but in the REAL world of small business, there is no bureacracy.

  4. miningmaven says:

    That’s an interesting take on regulations… unless of course you’re actually working within the industry like I do and can physically see the decline in manufacturing and mining industries. I compile the Keystone Coal Industry Manual yearly, which details the mines, coal users and coal sales companies. I can tell you that book, in the past 5 years, has decreased in size dramatically. While there are varying factors to this decrease, the main reason is due to manufacturing companies who are switching away from coal fired plants, closing up their business, or simply moving the business to another part of the world that doesn’t regulate. So yes, there is a shift in employment, it just doesn’t happen to be in the USA.

  5. palmcoaster says:

    Our job killings have to do with the fact that all we buy is made in China! And the reason for that is good old greed because “slavery pay at $130/month salary to a Chinese is very super profitable”. Has nothing to do with the excuse called regulations or over regulations. To the contrary the past administration “total deregulation” that promoted the dismantling to settle overseas of over 42,000 factories is what put us where we are now. On top of it all these conservatives including the Almighty Koch Brothers want more deregulation to benefit their polluting industries. These two increased their wealth since 2005 till now from 32 billion to 50 billion each, while reducing their work force by the thousands.
    These two oil barons and their Wall Street buddies trading without collateral in the stock market those “oil future contracts” is what keep the gouging at the pump, and they want more deregulation?
    How come myself a small business owner do not ask for more deregulation but instead I am clamoring to stop the outsourcing that is killing us all, instead. Tax imports, the wealthy and corporate barons like the Koch’s, at the same rate we middle class are taxed and jobs will be back again and our debt to China will be paid overnight! Even GOP fan Donald Trump is for taxing imports! Lets top this costly charade in DC and the lies, to get our jobs back.

  6. Billie Maher says:


    …”Again, in the bureaucrat’s world, there are dozens of people available to shuffle paper all day long,”…

    Agreed, look no further than our very own local gov’t entities. Lots of folks shuffling paper in the name of ‘pie in the sky’ regulations they invented so as to justify job creation for their cronies at a great expense to taxpayers. Okay, I guess since this is phony and corrupt invented regulation it doesn’t count.

    However, on the national level, deregulation in the banking industry is the reason for the overall state of the economy resulting in massive job losses. Bank of America is set to lay off even more employees, 30,000 to be exact – for now. Who knows what the rest on Wall Street will do, and they have already laid off quite a bit too! These are the firms who have benefitted the most from deregulation.

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