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Regulatory Red Herrings: Twists and Turns in Job Impacts

April 3rd, 2012 · No Comments

We’ve seen this clearly with Keystone XL pipeline. Proponents are letting us (all of U.S.) know that it will create 6500 … or 25,000 … or 100,000 … or over 1,000,000 jobs. In some ways, ‘just believe me’ type claims. The only independent analysis, to date, suggests that Keystone XL pipeline construction — even without consideration of the climate chaos impacts on future employment prospects — might actually lead to lost jobs across the entire U.S. economy (mainly due to resulting higher fuel costs in the Midwest when the pipeline gives this oil cheap transportation access to world markets) even when considering the ‘job growth’ due to additional work cleaning up pipeline spills.

And, when it comes to environmental regulation, polluting industry groups (and their astroturf groups and politicians) often scream about job impacts.

From 2007 to 2011 (pdf), the phrase “job-killing regulations” underwent a 17,550% increase in usage in U.S. newspapers (from just four appearances in 2007 to over seven hundred in 2011)

These “job killing” claims contrast with reports and studies that show significant economic (including job creation) impacts from action.

Reality: analysis of jobs impacts from a specific (major) project or regulation across the entire economy is difficult due to very serious systems-of-systems impacts. That analysis relies on models and, yet again, worthwhile to remember the old adage: all models are wrong although some models are useful.

The Institute for Policy Integrity took on the task of shining light on how job impact analysis is (ab)used in political discussion: The Regulatory Red Herring: The Role of Job Impact Analyses in Environmental Policy Debates. The executive summary provides a cogent example of the challenges in the discussion:

In an advocacy context, job impact analyses can tell very different stories, often depending on the narrator. In one revealing example, the American Coalition for Clean Coal Electricity estimated that two EPA rules on power plant emissions would trigger a 1.4 million job loss; meanwhile, using a different model and different assumptions, the Political Economy Research Institute predicted the same two rules would generate a 1.4 million job gain.

Honestly, what is the non-analyst / non-expert to do with such contrasting material?  Simply split the situation in the middle and say ‘zero job impact’?

Sadly, the Policy Integrity analysis doesn’t really provide an answer.  They didn’t provide a ‘peer review’ of these two (or other cited) studies to enable others to understand which is more accurate.  (Although they would like this to occur.) What they emphasize, however, is the importance of disclosed assumptions and, in an implied suggestion, that journalists and policy-makers should discount any study being waved around in the air where key assumptions aren’t disclosed.

Along with not doing ‘peer review’ of specific studies, the Policy Integrity study does not provide illumination on a larger question:

When it comes to discussions of environmental regulations impact on employment, do opponents of action systematically overstate or understate job losses and/or do proponents of action systematically understate or overstate job gain implications?

On this, for example, the Economic Policy Institute concluded that “fears of job losses are overblown“.  This is a truly significant issue to examine that can help illuminate such discussions.  When it comes to ‘cost-benefit analysis‘, looking back over the years, the situation has been nearly uniform that opponents of environmental regulation drastically overstate costs of action while discounting (typically ignoring) benefits of action even while proponents of the regulations have overstated costs while understating the benefits. Whether the Clean Air Act (re Clean Air Act benefits) or the Waxman-Markey American Clean Energy and Security (ACES) Act, analytical bias and methodologies have skewed the discussion to an overstatement of cost and understatement of benefit.  Writ large, more robust cost-benefit analysis would have shown much greater benefits from action than even the strongest proponents were laying out. It is reasonable to suspect that the same thing happens with jobs analysis. Sadly, the Policy Integrity work doesn’t provide insight on whether this is the case.  An important point to consider is that retrospective reviews of jobs claims are incredibly endeavors for an analyst and that is perhaps the reason it is hard (to find anyone who has done a credible job on this. Perhaps Policy Integrity next study will change this.

Update: Other posts on this report:

The phrase “job-killing regulation” has become a standard part of the political lexicon this campaign season, most often used to disparage President Barack Obama’s energy and environmental policies.

But a new report suggests we ought to take claims of regulatory-related unemployment with a grain of salt.

In the past three years, the Environmental Protection Agency has been proposing an array of new rules on air pollution in the United States. In return, Congress has typically focused on what impact those regulations will have on jobs. In the first month of 2011, House Republicans held nearly two dozen hearings on the links between government regulations and unemployment. That’s understandable, given that the recovery’s still stumbling. But the actual, hard estimates of job impacts have been all over the place.  ….  In any case, it’s worth being cautious anytime a politician or lobbying group confidently declares that a new regulation will annihilate thousands of jobs (or create thousands of jobs, for that matter). Odds are, those numbers are giving a woefully incomplete picture of the rule in question.

 

  • John Broder, Environmental Regs: Job Killers or Job Creators? ”It’s a rare day that you pick up a newspaper without encountering a reference to “job-killing regulations” from a pro-business Republican complaining about the burden of a new rule from the Environmental Protection Agency or other government office. Sometimes large and scary job loss numbers are attached to the assertion and attributed to a study, most often financed by the affected industry. …  “It may seem optimistic to imagine that politicians are going to drop the rhetoric about jobs,” Mr. Livermore said in a conference call, “but our hope is to improve the broader discourse about environmental rule-making.” He noted that rules to limit exposure to harmful emissions are imposed to save lives and improve health, not to create jobs.

Tags: 2012 Presidential Election · analysis · economics · environmental · environmental economics · global warming deniers

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