by Michael A. Livermore
Between 2007 and 2011, use of the phrase “job-killing regulations” in U.S. newspapers increased by 17,550%. Recently, committees of the 112th U.S. House of Representatives convened twenty hearings in its first twenty days that explored the link between regulations and the country’s job numbers. Protections for our public health and environment in particular have been on the receiving end of this barrage.
Claims that regulations have a significant impact on American employment call for careful scrutiny. Because they are repeated so often, the idea that regulations “kill jobs” can start to sound true, or at least “truthy.” But when you scratch the surface of these claims, too often they are based more on ideology than sound methodology.
Some of the most heated rhetoric in this debate can give the impression that regulations are creating a widespread jobs crisis and that the economy would be thriving were it not for President Obama’s environmental protection agenda. But what are all these claims linking negative job effects to regulation based on? In the scrum of politics it is often not clear: sometimes no analysis is cited, no data is included, no supporting documents are attached.
In some cases, studies are cited in attempt to estimate the employment effects of environmental protection. But their limitations are not communicated clearly enough or given enough attention.
In a recent study, we found it is very difficult to accurately assess how a regulation will affect an economy as large and dynamic as ours. Employment impact models attempt to replicate how the job market will respond to some external change, like an environmental regulation. They are complex, data intensive exercises that are sensitive to the type of model used and the assumptions that are inputted. They are certainly not the kinds of analyses that can be easily boiled down to a sound bite.
The problem is, starkly different pictures can emerge based on different factors chosen by the analyst.
In one case, when looking at the effects of two EPA regulations on employment, the Political Economy Research Institute forecasted that 1.46 million jobs would be gained over the next five years, while a test done on behalf of the American Counsel for Clean Coal Energy found that 1.44 million jobs would be lost over the next seven years.
That doesn’t mean these studies have nothing to tell us. But it is important to remember when they are used in the political debate that these results cannot be communicated quickly or easily. You can’t just load up a model, churn out an estimate and holler out a headline: “Regulation ‘X’ kills ‘Y’ number of jobs.” To use the information responsibly, at a minimum, the assumptions and other modeling choices must be disclosed, as well as an analysis that determines how sensitive the results are to modeling choices. These caveats are hardly the stuff of juicy tidbits that lobbyists and politicians like to fling around, but are necessary to communicate an accurate picture of what these studies can tell us.
Conventional wisdom about jobs and environmental protection has taken on a life of its own. One side sees a clean environment as anathema to full-employment; the other sees regulation as a major driver of job growth. The reality is that employment levels in the economy are driven by macroeconomic factors (interest rates, credit markets, etc.) that have nothing to do with environmental protection. The employment effects of even major environmental rules are drowned out by the dynamics of the broader economy, and are also swamped by the non-employment costs and benefits of environmental protection.
It is worth paying attention to the jobs impacts of environmental rules, but they must also be put in the proper context. Overheated political rhetoric based on shaky numbers does little inform the debate, and only serves to distract attention from the other important consequences of the choices that we face.
Michael A. Livermore is the executive director of the Institute for Policy Integrity and an adjunct professor at NYU Law. He is the author, along with Richard L. Revesz, of Retaking Rationality: How Cost-Benefit Analysis Can Better Protect the Environment and Our Health.