Killing the “Job-Killing Regulation” Meme

April 3, 2012
By Deborah Solomon
The phrase “job-killing regulation” has become a standard part of the political lexicon this campaign season, most often used to disparage President Barack Obama‘s energy and environmental policies.

But a new report suggests we ought to take claims of regulatory-related unemployment with a grain of salt. The Institute for Policy Integrity, a nonpartisan think tank associated with the New York University School of Law, finds many of the studies purporting to show mass job losses — or gains — from environmental rules use poorly executed economic models that do not accurately measure true costs and benefits.

The study’s findings could help the White House deflect pressure to jettison or delay environmental rules that critics say will cost jobs.

A case in point: Two studies purporting to measure the employment impact of two Environmental Protection Agency rules came to wildly different conclusions. A report commissioned by the American Coalition for Clean Coal Electricity estimates the two rules, which seek to curb air pollution, will result in a 1.4 million job loss. A review of the two rules by the Political Economy Research Institute estimates a 1.4 million job gain.

The difference stems from the types of models the researchers use and the assumptions they make. But too often, the study finds, those assumptions and the limitations of the research are not disclosed.

For instance, in assessing a new environmental rule that will require a plant to close, economists can come to different conclusions about the job impact based on their assessment of the labor market. If an economist assumes a flexible labor market, in which workers move from one sector to another in response to job openings, the impact will be minimal. But if an economist assumes a tight labor market in which jobs are hard to come by, the impact will be much greater.

The debate over the job impact of environmental rules is of critical importance given the number of new environmental rules the Obama administration is considering. The White House already jettisoned a tougher air quality rule that would have curbed smog over concerns it could kill jobs, and it has delayed implementation of other regulations for similar reasons. Lawmakers, industry representatives and Republican candidates for president routinely cite possible job losses as a reason to kill a regulation.

In fact, the study found that during the first 20 days of the 112th Congress in 2011, congressional committees scheduled at least 20 separate hearings on “the purported link between regulations and the nation’s job woes.”

The report suggests policymakers focus on cost-benefit analyses, rather than job impact, when making decisions about rules. As it now stands, the report states, job-impact studies are “a misleading distraction — nothing more than a red herring.”

(Deborah Solomon is a member of the Bloomberg View editorial board. Follow her on Twitter.)

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