Regs and Jobs

November 14th, 2011 at 10:54 am

 The more we learn about the actual job impacts of government regulation, the better, and I found the survey in this AM’s WaPo to be quite well done.

 I’ve always maintained that there’s just no careful research that would lead you to believe that regulation systematically kills jobs.  Sure, compliance can be a real pain for employers—I’ve seen that myself many times.   And compliance often leads them to expend resources they’d rather not, some of which, as the article points out, actually creates employment (to retrofit a coal plant to meet EPA standards, e.g., an executive of such a plant noted that they “…have to hire plumbers, electricians, painters, folks who do that kind of work…[j]obs are created in the process — no question about that”)

But final analysis:

Some jobs are lost. Others are created. In the end, say economists who have studied this question, the overall impact on employment is minimal.

And this focus on jobs looks, of course, exclusively on the costs side of the equation.  If the costs in terms of jobs is a wash, and the benefits side is even slightly positive, then the conservative talking point for aggressive deregulation should largely be ignored. 

That’s not saying we should leave everything the way it is.  My own experience in government led me to believe that the problem is not usually the regs themselves, it’s how they’re implemented.  Sometimes, like when the housing bubble was inflating, existent regulations are ignored—despite internal warnings, the Federal Reserve ignored the buildup of the subprime slime, e.g.  Other times, environmental reviews that must occur before breaking ground on a project just take too long.

But I agree with the regulation expert cited in the piece who summed it up like this:

“The notion that we should deregulate everything because we have a recession is completely wrongheaded.  Whether a regulation is a good or bad idea is not a function of employment in the industry being regulated.  The right question is: On balance, does our society benefit?”

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One comment in reply to "Regs and Jobs"

  1. jonathan says:

    Another example is Enterprise car rental. When CA changed the rules and added significant regulation, they realized – per their CEO’s quotes – that their customers hated them. They decided to change their business model. They started to become a better competitor quite quickly because they took the lessons they learned in a higher regulatory environment and ran with them in every market.

    People misunderstand the nature of constraint. The gospel today is that eliminating constraint leads to a better competitor when the evidence – of all sorts, from all countries – is that constraint helps shape a competitor. If there is a problem it’s that our companies don’t have enough certainty about the extent of their constraints in key areas like healthcare. I’m not talking about impending Obamacare but the vagaries of the so-called market which buffets them with inconsistent pricing and coverage schemes. That makes it difficult for them to plan, both for healthcare and for how they allocate money (and hiring and time). By contrast, our competitors have taken that burden off employers. A German company knows what it has to do, what it costs, etc.


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