The words have become a familiar accusation in our political debate: “job-killing regulations.” They often are hurled by Republicans at the U.S. Environmental Protection Agency, and, thus, the Obama White House. For their part, advocates of new rules volley returns with their own claims about job creation.
No surprise that many people recently scratched their heads when the American Coalition for Clean Coal Electricity argued that two new EPA rules for curbing power plant emissions would trigger 1.4 million job losses, and the Political Economy Research Institute countered that the rules actually would generate 1.4 million jobs. Which calculation is right? The Institute for Policy Integrity at the New York University School of Law cited the colliding evaluations in its recent report, “The Regulatory Red Herring.” Thankfully, it also brought needed perspective to the discussion.
The report shares that there is nothing wrong with weighing the impact on employment of new regulations. It has an obvious and important part. What the report stresses is that the job numbers should not serve as a “trump card.” They should be one aspect of a broader cost-benefit analysis, driven by traditional economic principles, the compliance costs considered with the range of environmental, health and safety benefits.
Clearly, new regulations can lead to job losses. The report advises that any assessment does well to note the difference between short-term and long-term unemployment. It describes short-term unemployment as involving “relatively minor costs for job search, relocation and retraining.” The long-term variety? The costs may be “more substantive,” involving greater retraining, diminished productivity and income, even health troubles.
More, regulations can work both ways, positively and negatively. The report emphasizes that jobs lost in one sector may be accompanied by direct job gains elsewhere. Install new technologies to meet new regulations, and it follows that someone must make the machines, and someone must conduct the installation.
The report cautions that the economic models for evaluating the impact must be well suited to the task. Some models work more effectively on a regional scale or for a single industry. Others fit better nationally. In addition, the report warns that all models involve a factor of uncertainty, something analysts and policymakers should acknowledge up front. Too often, advocates on both sides barrel ahead as if there is no doubt.
The public is left to wonder how two organizations can look at the same rule and come to such divergent conclusions, 1.4 million jobs lost versus 1.4 million gained. To say the whole thing is complicated may seem little comfort. Yet, the suspicion is, most of us understand the complexity at work in a many layered, dynamic economy. What’s encouraging is the Institute for Policy Integrity making the case, inviting a more elevated debate.