Those job-creating federal regulations

You’ve hard all about job-killing regulations. Bloomberg Businessweek isn’t buying it.

Government regulations do kill jobs, often by the thousands. Although it’s too early to tell how many layoffs may result from health-care and Wall Street reforms, there is a body of research going back decades detailing what has happened time and time again when Washington handed down sweeping environmental regulations: Costs increased, prices went up, and workers were fired. Supporters and opponents of the EPA’s new power plant rules agree that they will almost certainly result in dozens of coal plants shutting down and hundreds of workers being laid off.

But that’s not the whole picture. Government employment figures also show that those same regulations usually wind up creating about as many jobs as they kill. “We find there is no net impact,” says Richard Morgenstern, the EPA’s director of policy analysis in the Reagan and Clinton Administrations and now a researcher with Resources for the Future, a nonpartisan energy think tank in Washington. “The job creation and the job destruction roughly cancel each other out.”

In 2002, Morgenstern and his colleagues published a landmark study detailing the effects of regulations on jobs in four polluting industries: paper, plastics, petroleum, and iron and steel. Drawing on more than 10 years’ worth of U.S. Census data, the study found new regulations led to higher production costs that pushed up prices, resulting in lost sales and layoffs. Yet those job losses were offset by new jobs in pollution abatement.

Of course, the focus on jobs eliminated or created misses the larger point: These regulations inhibit private wealth creation. The economy grows, thus producing lasting jobs, only when people have incentives to work, save, and invest. Regulations do no create those incentives.

What if government hired someone to dig a hole, hired someone else to fill in the hole, then hired a regulator to ensure the dirt-removal-and-replacement process compiled with government-determined environmental standards? You would have created three jobs. None of them would do a thing to promote economic growth.

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...

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