Job-Killing Regulations: The Elephant Not in the Room

08/16/2017 04:32 pm ET

Ever since Ronald Reagan first went after “job-killing regulations” the slogan has become a universal truth. Now, the media routinely report on Republican studies, suspensions, and reversals of many regulations. It is like a scene from Animal Farm, Trump and the Trumpettes shuffling around the fire, grunting “Regulation bad! De-regulation good!” while throwing thousands of pages of despised regulations into the flames. Billions saved. Industries saved. Jobs saved. Hoorah!

There is, however, just one small problem with this picture: it is not true.

Over the past few decades, a fair number of studies have looked for the evidence that regulations are job-killers. Industry studies generally conclude that many jobs are lost through regulation. Progressive studies often conclude that regulations are job-creators. Who can be believed? Let’s look at recent reviews.

Cary Coglianese (1) at Penn reviewed four major studies of the evidence in 2013, concluding that the effect of the regulations on jobs and the economy was marginal.

The Institute for Policy Integrity in 2017 issued a fact sheet (2) highlighting their conclusion that “regulations have little effect on aggregate employment or unemployment rates.” Since studies often rely upon models to predict effects on jobs, the fact sheet also emphasized that “job analysis models can easily be manipulated to predict either job losses or gains.” In technical talk, the assumptions made in the models can sharply swing the results one way or the other. The models are very sensitive to the assumptions.

Alana Semuels, writing in the Atlantic, (3) looked more narrowly at environmental regulations, and found that the studies showed marginal effects on jobs. Jenna Ruddock, writing on the Medium, (4) reviewed the literature and summarized her findings in the title of her article: “Do environmental regulations really “kill jobs”? The data says no.”

And another. Abel Russ and Eric Schaeffer, (5) at The Environmental Integrity Project, looked back at over thirty years of studies, and summarized the data as: “don’t believe the job-killer hype.”

Most interesting, I think, is the annual Office of Management and Budget report to Congress on the costs and benefits of major regulations. (6) Generally, a major rule imposes a cost of over $100 million dollars a year. OMB is no friend of regulations. In this report, OMB compiles the costs and benefits of major Federal regulations over the past ten years, pointing out the strengths and weaknesses of each agency’s cost-benefit analyses.

It is worth quoting the first paragraph of the OMB Executive Summary: “The estimated annual benefits of major Federal regulations reviewed by OMB from October 1, 2005, to September 30, 2015, for which agencies estimated and monetized both benefits and costs, are in the aggregate between $208 billion and $672 billion, while the estimated annual costs are in the aggregate between $57 billion and $85 billion, reported in 2001 dollars. In 2014 dollars, aggregate annual benefits are estimated to be between $269 and $872 billion and costs between $74 and $110 billion. These ranges reflect uncertainty in the benefits and costs of each rule at the time that it was evaluated.”

That is, looking at 129 major Federal rules over a ten year period, for which both costs and benefits were estimated, collectively the benefits outweighed the costs by 3-8 times. For every dollar in costs, there were three to eight dollars in benefits.

Attacking “job-killing regulations” only makes sense if you ignore the benefits!

But not all regulations are created equal. The OMB report notes that the 37 major EPA rules accounted for the greatest costs and benefits, with the benefits far outweighing the costs. And nearly all the costs and benefits of EPA’s rules were from rules to improve air quality.

The two rules with nearly all of EPA’s benefits were related to fine particulates in the air: the Clean Air Fine Particle Implementation Rule (2007); and the National Emission Standards for Hazardous Air Pollutants From Coal- and Oil-Fired Electric Utility Steam Generating Units (“MATS” - 2011). The principal benefit is reducing premature deaths from inhaling fine particulate matter when we breathe.

What this means is that the air we breathe is not yet clean enough. Consider the very recent report by Harvard researchers, “Air Pollutant Mortality in the Medicare Population.” (7) A database of 60 million seniors was reviewed. The first finding was that there is no safe level below which particulates are not a problem. The second finding was that the risk of premature death could be reduced even further, with benefits exceeding the costs, even below the requirements of the current national standard adopted by EPA.

Thus, the “job-killing” EPA is saving lives cost-effectively.

Looking at all this material, it would be easy to bog down in the details. No need. The elephant is not in the room. Job-killing regulations do not kill jobs. Rather, repealing some of these regulations would kill tens of thousands of Americans.

The slogan “job-killing regulations” has persisted because it has political value, no more than that. Everyone knows someone who has lost a job. It is as easy to blame regulations as to blame anything or anyone else. Isn’t it just common sense that if complying with regulations costs money, then it must also cost jobs? Another case where common sense may not be sensible. Republicans will not give up this slogan until it no longer works to mobilize their supporters.

Honesty: Caveats. (1) Specific regulations may harm local businesses or industries, leading them to cut jobs or salaries, ask workers to do more with less, or even relocate to another state or country with looser regulations. All of these have happened. We should not just shrug and say it’s too bad for the workers. We also should not shout the slogan and cancel the regulations.

Rather, we should begin to care more for the affected workers. We need legislation to address worker care, just as we address Medicare. Support for job training, relocation expenses, or even several years of salary, all need to be addressed for specific cases with local adverse effects. The market is cruel. We need not be, when it comes to our workers.

(2) Not every regulation is cost-effective. If the benefits and costs are about the same, we need to be willing to consider the trade-offs before plunging ahead with the regulation. There may be other ways to achieve the desired results.

Bottom line: If evidence matters, if serious analyses matter, if facts matter, then the slogan “Job-Killing Regulations” needs to be shoved under the bed, only to be brought out late at night in stories to scare the children, while the adults wink at each other, knowing that it is only a story after all.

The elephant is not in the room. Are there any adults here?

1  Professor of Law and Political Science, Penn Law School and School of Arts and Sciences, https://publicpolicy.wharton.upenn.edu/issue-brief/v1n3.php, March 2013

2  Institute for Policy Integrity, New York University School of Law, http://policyintegrity.org/files/media/Jobs_and_Regulation_Factsheet.pdf, February 2017

3  Alana Semuels, “Do Regulations Kill Jobs?” https://www.theatlantic.com/business/archive/2017/01/regulations-jobs/513563/, January 2017

4  Jenna Ruddock, “Do environmental regulations really “kill jobs”? The data says no.” https://medium.com/@jmruddock/do-environmental-regulations-really-kill-jobs-the-data-says-no-5cf198b1ae6, February 2017

5  Abel Russ and Eric Schaeffer, “Don’t believe the job-killer hype,” http://www.environmentalintegrity.org/wp-content/uploads/2017/01/Jobs-and-environment-report.pdf, January 2017

6  OMB, “2016 Draft Report to Congress on the Benefits and Costs of Federal Regulations” https://obamawhitehouse.archives.gov/sites/default/files/omb/assets/ legislative_reports/draft_2016_cost_benefit_report_12_14_2016_2.pdf, Dec 2016

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