Does Regulation Kill Jobs?

April 16, 2014
By Kevin Rowe MPP14

Some Members of Congress and stakeholders make the claim that government regulation hampers economic activity and contributes to unemployment in the United States. The April 10 Regulatory Policy Program (RPP) Seminar explored some of the evidence on the employment impacts of regulations from a new book, "Does Regulation Kill Jobs?".

The panel discussion featured two of the book’s contributing authors, Joseph Aldy, Assistant Professor of Public Policy at Harvard Kennedy School and Faculty Chair of the RPP, and Lisa A. Robinson, Senior Fellow in the Mossavar-Rahmani Center for Business and Government, as well as one of the book’s editors, Cary Coglianese, who is Edward B. Shils Professor of Law and Professor of Political Science and Director of the Penn Program on Regulation at the University of Pennsylvania.

Coglianese, Aldy, and Robinson each offered responses to the question posed by the book’s title, agreeing that by and large the answer to the question is more complicated than a simple yes or no.

Coglianese outlined competing narratives on regulation and jobs to illustrate how understanding the employment effects of regulation requires more than counting laid off workers. Whereas talk of “job-killing regulation” has taken a prominent place in the current political discourse, environmentalists and others on the left have emphasized a countervailing effect, namely jobs created by regulations that, for example, require firms to install new technologies for pollution control. This debate suggests that evaluations of the employment impacts of regulation must look at job gains in addition to losses, but also to other outcomes, such as reduced hours and effects on labor productivity.

Aldy reviewed results from his chapter in the book, a study conducted with Billy Pizer of Duke University, that estimated how power sector regulations could increase energy prices and adversely impact manufacturing jobs and competitiveness. Based on a statistical analysis of historic electricity prices, output, and net imports in manufacturing, they estimate that a regulation imposing a carbon price in the power sector would result in only 4,000 to 11,000 job losses across the manufacturing sector. Aldy argued that the concentration of these losses in a few energy-intensive industries could make them highly politically salient nonetheless.

Finally, Robinson provided a series of recommendations for incorporating employment impacts into the benefit-cost analyses that are required for most new regulations by the U.S. Federal Government. She also called for further research to develop a more sophisticated understanding of how firms alter their prices, profits, and employment to cope with regulations that impose higher compliance costs.

The Spring 2014 New Directions in Regulation Seminar series is sponsored by the Regulatory Policy Program at the Mossavar-Rahmani Center for Business and Government. For information please visit http://www.hks.harvard.edu/centers/mrcbg/programs/rpp/seminars.

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panelists

Lisa A. Robinson (Left), senior fellow in the Mossavar-Rahmani Center for Business and Government; and Cary Coglianese, Edward B. Shils Professor of Law and Professor of Political Science and Director of the Penn Program on Regulation at the University of Pennsylvania.

Robinson provided a series of recommendations for incorporating employment impacts into the benefit-cost analyses that are required for most new regulations by the U.S. Federal Government.