Regulations Benefit Job Market, Report Shows
by Matthew Madia, 4/12/2011
Contrary to the claims of congressional Republicans, regulations are not job-killers. According to a research paper released today by the Economic Policy Institute, regulations do not cause a significant negative impact on the labor market. In fact, for some industries, regulations actually result in job growth.
The paper, Regulation, Employment, and the Economy: Fears of job loss are overblown, also reviews instances in which deregulation, not regulation, put Americans out of work. The paper points out that the current economic downturn – caused by dangerous mortgage lending and derivatives practices – could have been mitigated by stricter regulation of the financial market and was actually facilitated by a deregulatory push that began in the 1970s.
Anti-government lawmakers in the 112th Congress, particularly in the House, have spent a good portion of the year railing against regulation. The House has held dozens of hearings – with titles like “Regulatory Impediments to Job Creation” and “EPA’s Greenhouse Gas Regulations and Their Effect on American Jobs” – focusing on the regulatory process or individual regulations, often placing them in a jobs or economic context.
But at the macro level, existing research does not support the claim that regulation impairs the job market or job growth. According to John Irons and Isaac Shapiro, the paper’s authors, regulation generally has no significant impact on the labor market as a whole. If anything, regulations, particularly environmental regulations, hold the potential to create jobs. (Pollution control standards create work for the pollution abatement industry, for example.)
The paper also reviews studies of regulations’ impacts on the economy as a whole and finds that credible studies on the subject consistently show that regulations’ benefits to society outweigh compliance costs.
Some of the most interesting data Irons and Shapiro review are Department of Labor statistics on mass layoffs. “Since 2007, the government has published information on how many ‘extended mass job layoffs’ employers attribute to government regulations/intervention,” the paper states. “Over this period, only a tiny fraction of such job layoffs (about 0.3% of the 1.5 million of these layoffs each year) were attributed by employers to government regulations/intervention.”
The paper concludes:
Given today’s extraordinarily weak labor market, it is imperative that assessments of government policies consider effects on the economy and employment levels. At the same time, however, this concern should not lead to unwarranted efforts to weaken government regulators and regulations.
The lessons of the Great Recession and of decades of government regulation point in the opposite direction. An emphasis on deregulation can contribute to enormous economic dislocation, and this review of the studies of regulations in place finds little evidence of significant negative effects on employment. Overall, the picture that emerges from this review is a positive one. For decades, regulations have generally and consistently struck a reasonable balance, with their benefits to health, safety, and well-being far exceeding their costs.