Las Vegas Sun

August 30, 2014

Currently: 84° — Complete forecast | Log in | Create an account

Do regulations really kill jobs overall? Not so much

Sun Coverage

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. President Barack Obama also asked the Environmental Protection Agency this month 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 although 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 of census data on four 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 don’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,” Noll said.

That point is 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.)

This year, Williams sent a letter to Rep. Darrell Issa, R-Calif., who has 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,” Noll said. “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

Join the Discussion:

Check this out for a full explanation of our conversion to the LiveFyre commenting system and instructions on how to sign up for an account.

Full comments policy

Previous Discussion: 5 comments so far…

Comments are moderated by Las Vegas Sun editors. Our goal is not to limit the discussion, but rather to elevate it. Comments should be relevant and contain no abusive language. Comments that are off-topic, vulgar, profane or include personal attacks will be removed. Full comments policy. Additionally, we now display comments from trusted commenters by default. Those wishing to become a trusted commenter need to verify their identity or sign in with Facebook Connect to tie their Facebook account to their Las Vegas Sun account. For more on this change, read our story about how it works and why we did it.

Only trusted comments are displayed on this page. Untrusted comments have expired from this story.

  1. The letter seems a bit odd in that it talks about how jobs move from perhaps manufacturing to pollution abatement. But if you push the cost of manufacturing high enough, the jobs leave the country. And what the economy needs is the creation of wealth overall and if you take a job that creates substantial wealth and replace it with one that creates less, the economy loses. It may not lose many jobs in the process but it has less wealth and so the people are potentially less well off. So, just by saying that the number of jobs does not change much does not address the underlying issue. If the government hired all of the unemployed and had them dig and refill holes, there would be no wealth being created and so we would not really be better off as a country. That is not to say that pollution abatement is the same as digging and filling a hole or that it has no value, but the value of the output of the jobs is what matters, not just the number of them.

  2. Why don't they ask all of those manufacturers that moved their operations overseas that question. Regulations kill jobs and move what was here overseas. Check your I phone or any other electronic device. Check the tags in your clothes, and wonder why it can be made so much cheaper overseas. Wages is not the only driving force. Ask LeviStrauss why they no longer manufacture jeans in the USA. Why is US steel no longer made in the US.

    In Case you wondered - regulations drove up the cost of doing business here in the USA Or made it impossible to do business here. Thanks to the Labor department, Unions and other special interests, AKA congress critters.

  3. "But is the claim that regulation kills jobs true? We asked experts..."

    Wang -- I see you asked everyone but the REAL experts, just your average small business owners. The NPRI did a few months ago, and what they had to say doesn't go along with this. Until you base your writings on that you have no credibility here.

    "The struggle for liberty has been a struggle against Government. The essential scheme of our Constitution and Bill of Rights was to take Government off the backs of people." -- Columbia Broadcasting Sys., Inc. v. Democratic Nat'l Comm., 412 U.S. 94, 162 (1973), Justice Douglas concurring

  4. Gibson Guitar is the classic case of government regulation. Gibson can make guitars in India but not America..
    Harley..
    Greenspun Editorials..Sometime I agree but last Sunday..he wrote an editorial about class warfare in America.
    He wrote, "The fact is that the United States has a problem, and everyone needs to contribute to the solution. Those who can pay more, should. Those who can work more, should. Those who can sacrifice more, should."
    That is a paraphrase of Karl Marx.."From each according to his ability"..and the rest of it is "to each according to his need."

  5. This seams to be a story to try to swing voters. It has little real substance. The experts I'm sure are experts in something but not this. We have more oil and natural recources here but because of the epa and regulations can't get to it. The regulations have stiffled industry in this country for decades.

    What do we produce here?