Since 1993, government agencies have been required by executive order to analyze the broader effects of regulation on “productivity, employment, and competitiveness.” Yet despite this obligation, most of the economic analyses that agencies conduct on their regulations have focused just on the direct benefits and costs of regulatory compliance. Although these immediate impacts are obviously of great importance, the recent economic downturn has made the broader impacts of regulation increasingly salient.
In order to advance research on regulation’s broader economic impacts, the Penn Program on Regulation (PPR) recently hosted a workshop in Washington, D.C., on “Beyond Compliance Costs: The Other Economic Impacts of Regulation.”
“The current economic and political climate in the United States makes plain how much we need more academic research on regulation’s full economic consequences,” said Cary Coglianese, the Director of PPR and the workshop moderator.
The workshop took place a week after the government issued its surprising May jobs report, released by the Bureau of Labor Statistics, which indicated that the number of long-term unemployed individuals increased that month from 5.1 to 5.4 million.
The workshop opened with a discussion of existing research on the impacts of regulation on jobs. Several commentators noted that even though there are negative impacts of regulation on specific businesses, the overall net effects on jobs are rather small, at least according to existing research.
Others noted the difficulty of predicting the impact of any specific regulation on overall employment, as many different factors affect employment. It can also be hard to predict how a regulation that may take effect a year or two into the future will impact the overall economy at that time.
Although it was generally recognized that agencies could do more in their cost-benefit analyses to try to forecast the employment impacts of new regulations, some participants suggested that employment impacts may already be taken into account too much in the regulatory process. The political pressures on members of Congress and, by extension, regulatory agencies may amplify attention to employment impacts even when the actual effects are negligible or nonexistent.
The workshop concluded with a discussion of possible policy recommendations that regulators should follow. Some workshop participants suggested establishing new institutions that could produce credible, independent regulatory impact analyses, akin to the role played by the Congressional Budget Office in the budgetary process. Such an external check on the analysis of proposed regulations might counteract some of the political pressures that skew decisionmakers’ priorities. On the other hand, one participant cautioned that greater external oversight of agencies might make them more cautious and less productive.
The workshop brought together about thirty academic experts from law, policy, and economics as well as leading analysts from Congress and several governmental agencies, including the Department of Agriculture, Department of Labor, and Environmental Protection Agency.
The workshop opened with a presentation by Adriana Kugler, the Chief Economist of the U.S. Department of Labor, and included a keynote address by John Graham, the Dean of the School of Public and Environmental Affairs at Indiana University and a former Administrator of the Office of Information and Regulatory Affairs.
The workshop made progress in highlighting problems requiring further investigation. PPR will host a follow-up to the workshop this fall at the University of Pennsylvania Law School, an event that will coincide the release of an upcoming book edited by PPR’s Coglianese that will feature analyses of the current crisis of confidence in the U.S. regulatory system.