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  • Do Regulations Kill Jobs? Not at All, Says Reid

    In a floor speech yesterday, Senate Majority Leader Harry Reid (D–NV)claimed that “only a tiny fraction of layoffs have anything at all to do with tighter regulation.” In fact, he said, “last year, only three-tenths of 1 percent of people who lost their jobs were let go principally because of government regulation or intervention.”

    It’s an impressive sounding stat. The same or similar figures have been picked up in media outlets ranging from The New York Times to Mother Jones as proof that regulation is not a contributing cause of America’s stubbornly high jobless rate. However, the statistics are not only of doubtful accuracy, but have little to do with the primary cause of joblessness in the U.S. economy today: the lack of job creation.

    The numbers come from the Labor Department’s Bureau of Labor Statistics (BLS), which, in cooperation from state authorities, tracks mass layoffs, defined as layoffs of 50 or more workers for 31 days or more. In each case in which such a “mass layoff” is identified, state authorities interview the employers involved, asking them (among other things) the reason for the layoffs. For the third quarter, BLS reported that 0.3 percent of respondents listed “governmental regulations/intervention” as the reason.

    It appears to be a simple process, but it’s actually quite tricky. The first problem is that economic hardship does not come with labels. Employers know if their costs are rising but not necessarily whether it is due to new burdens imposed on their suppliers or other factors. They may know that they didn’t get the capital they needed but not if it was because investors had better opportunities or because of government financial rules. They will know if demand has slumped, but it’s not so clear whether it was because their product is valued less by the marketplace or because government rules choked off demand from customers. The actual causes are likely to be mixed.

    But even if government interviewers could identify with precision the reasons for mass layoffs, that would tell us little about why unemployment is so high. Mass layoffs are only part of the job loss picture—job losses don’t always come 50 or more at a time. Most small businesses don’t even have 50 employees.

    But where Reid and others really miss the mark, however, is in assuming that job losses are the problem, rather than a lack of job creation. As argued by my colleague James Sherk, layoffs spiked early in the recession but then they fell sharply. Since late 2009, gross job losses in the economy have actually been below their pre-recession levels. In fact, in 2010 there were fewer gross job losses than any time since the government began tracking these figures in 1992. Unemployment remains high because the economy has not been creating jobs. Last September, for instance, employers hired only 4.2 million new workers—a million fewer monthly new hires than before the recession.

    None of this is reflected in the BLS’s mass layoff reports. Employers are asked why they let employees go, not why they didn’t expand. No one asks would-be entrepreneurs why they did not start an enterprise last month or inventors why they did not invent something. When small businessmen are asked about their concerns, they increasingly cite regulation. In a survey of small businessmen conducted last month by Gallup, for example, government regulation topped their list of concerns,  topping both “consumer confidence” and “lack of demand.”

    Of course, no one argues that the drop in job creation is solely due to regulation. But regulation is certainly a big part of the problem—placing a burden on anything will decrease the amount of it produced, and regulatory burdens have increased at record rates the past few years. Decreasing regulatory costs should be part of the jobs solution.

    Posted in Featured [slideshow_deploy]

    8 Responses to Do Regulations Kill Jobs? Not at All, Says Reid

    1. Carl says:

      Anyone who believes that regulations are not killing jobs and American enterprise has their head in the sand. Regarding Mr Reid

    2. Bobbie says:

      if ONE PERSON IS LAID OFF because of government, it's too much! to whose benefit is it? outside the businesses' own expenses, government is an extra unneeded expense at a corrupt cost. if "regulations doesn't kill jobs," what DOES government mandated regulations DO that are productive to the country and at no expense to economic growth that REDUCING regulations wouldn't do BETTER and within BUSINESS REASON? when something this broad and ignorant is said please insist answers with specifics and focus on removing government that promotes nothing without government: SOCIALISM!

      the government is protecting and growing themselves while opposing all will of the people! People aren't subjects, we're people! HUMAN LIFE who need no government outside ones own!

      Mr Reid should be evaluated and removed as should countless others whose positions have been intentionally abused to be made contentiously dangerous to the livelihood of Americans caused by indoctrinated, programmed mental incompetency in American leadership, whether voted in or not! OUT!!
      TAKE OVER shouldn't be expected in any leader of AMERICA!..that's too easy! STOP! America(ns) trusted too much and too many!

    3. zff says:

      Oh, c'mon liberals. You really expect use to believe that raising the cost and effort of hiring people, the cost and effort of producing goods, the cost and effort of running a business and so on and so forth has little bearing on layoffs and hiring? You might as well say that making going to the zoo more costly and a hassle for consumers would have no bearing on peoples decision to go to the zoo.

      "Regulation uncertainty debunked part infinity" Mother Jones? More like "regulation uncertainty debunked part zero." You can't debunk what is obvious day to day reality and common sense.

    4. Red Baker says:

      Do the math for regulation cost — 0.3% of 140,000,000 American jobs = 420,000 jobs. Is that per quarter? If so, that's 1,680,000 jobs per year. That's terrible.

      We better get serious about regulation costs.

      I find it sad that the only recent big study I've found on the total cost of federal regulations (Crain and Crain, 2010, SBA) puts the total cost in 2008 at $1.75 trillion per year. That would be about 12.2% of GDP, an obscene cost.

    5. lgeubank says:

      Harry the Smarmy Ghost doesn't care about jobs "lost or not created." He cares about bashing "capitalist fat cats."

      Besides, what does he know? Insect larvae are eating his brain cells.

    6. Ern says:

      harry reid is delusional. not to mention dangerous.

    7. guest says:

      Harry the Smarmy Ghost hasn't had a coherent thought since moth larvae started eating his brain.

    8. Brandon says:

      James, being the Heritage fraud that he is, presents "regulation as a top concern" from the Gallup poll AS IF IT'S SHARED BY 75% OR MORE OF SMALL BUSINESSMEN. But, if you actually bother to LOOK at the survey, you find that IT'S ONLY 22%. Of course, that doesn't mean that SOME regulations may not be overbearing and should be reconsidered… but let's not get ahead of ourselves. If only 22% of small businessmen are worked up, but the other 78% aren't… Plus, lack of demand and conservative confidence combined have MORE subscribers by about 5%.

      I mean, the way Republicans and right-wingers talk, you'd THINK that most business owners (at least 60% or more) by far are REALLY SCARED OF REGULATION. But if only 22% of even small business owners are concerned (COULD be 1/4th IF you take into account the "new healthcare policy" thing, tho, but still…), we need to at least stop the hyperbolical rhetoric.

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