Does Regulation Kill Jobs?

13: Analysis to Inform Public Discourse on Jobs and Regulation

Chapter 13 Analysis to Inform Public Discourse on Jobs and Regulation Michael A. Livermore and Jason A. Schwartz Despite the fact that job impact analysis poses steep challenges and is unlikely to substantially alter most regulatory choices, there are good reasons to integrate employment effects into cost–benefit analysis of federal rule makings. Cost–benefit analysis not only offers government decision makers a technocratic tool to identify efficient policies; it also informs public debate about the social effects of regulation. This broader deliberative purpose justifies committing federal agencies’ analytical resources to investigate employment effects. Cost–benefit analysis is often a complex and time-consuming task: it can involve engineering studies and technology forecasts, detailed scientific models and dose-response curves, and careful economic surveys to value health or environmental gains. As several authors in this book have noted, broadening the scope of cost–benefit analysis to include job effects will only multiply the analytical challenges. Devoting scarce resources to this daunting enterprise demands strong justification. Cost–benefit analysis customarily concentrates on those regulatory effects that could tip the scales for or against a policy alternative, by changing its comparative efficiency (U.S. Office of Management and Budget 2003:26). Yet employment effects may seldom be significant enough to alter any given rule’s efficiency calculus. The most sophisticated empirical assessments to date typically calculate employment impacts as a small fraction of overall regulatory costs and benefits. Except for rare cases where a rule’s marginal net benefits are very modest, regulatory efficiency may not be a good reason for agencies to quantify and monetize job impacts. 240 Michael A. Livermore and Jason A. Schwartz In this chapter, we argue that, nevertheless, informing the public debate may justify the substantial effort required for job impact analysis. By placing employment effects in context, highlighting distributional impacts, and clarifying rules’ cumulative effects on employment, job impact analysis can contribute to a more productive democratic conversation about regulatory policy. First, job impact analysis can benefit public debates by adding realism and empirical underpinnings to estimates of employment impacts and by contextualizing those effects within a rule’s broader costs and benefits . In the wake of the 2008 financial crisis and 2010 midterm elections, which returned divided government to Washington, DC, the public dialogue on environmental regulations has become clouded with rhetoric and the misleading use of empirical studies. Monetizing job impacts may provide clarity, by enabling the public to assess a rule’s net social benefits in light of employment effects. To maximize this positive influence on the public debate, agencies should follow best practices for transparent, accessible analysis. Second, job impact analysis can highlight salient distributional consequences . Even if a rule’s job gains and losses cancel out, leaving no discernible efficiency impact, certain communities may experience disproportionate employment burdens. Although fully incorporating such effects into cost–benefit analysis raises weighty methodological and ethical questions, job impact analysis can at least identify and quantify these effects. Finally, job impact analysis can clarify rules’ cumulative effects on employment. Even if an individual rule’s net job impact is too minor to alter its efficiency, cumulatively a whole suite of regulatory policies may generate significant employment effects. Some advocates calling for moratoria on rule makings have pointed to cumulative employment effects for support, especially following the recent recession. Analysis could quantify and monetize cumulative employment effects—if any— and compare them with the cumulative net benefits of regulation, to help determine whether such moratoria are justified. For agencies, the prospect of devoting considerable time to a difficult task unlikely to significantly affect policy outcomes may seem wasteful. Job impact analysis will have opportunity costs by diverting agency resources from other vital analytical questions. Yet analysts must not overlooktheirwork ’sconsiderablebenefitstothepublicdebate.Administrative agencies are ultimately responsible to the American people. Even if job impact analysis is not necessary to identify actions that efficiently promote the public interest, such analysis may be necessary to justify regulatory choices to the public—a task that is essential in a democratic society. Analysis to Inform Public Discourse on Jobs and Regulation 241 Employment Considerations May Not Typically Affect Rules’ Efficiency Both the academic literature and recent examples from agencies’ impact analyses suggest that, for many rules—perhaps the vast majority—the efficiency effects associated with changes in employment are markedly smaller than other regulatory impacts, such as public health improvements or compliance costs. Quantifying and monetizing job impacts, therefore, may contribute little to the goal of maximizing regulatory efficiency. In...