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Do EPA Regulations Cost Jobs? The resounding answer is NO.

February 6, 2017

Representative Matt Gaetz (R – FL) has introduced a bill entitled, “To Terminate the Environmental Protection Agency“. This seems to be one of the goals of the current administration and I have already written about the value of the EPA. If you need more information on this, I recommend the information found here. Now, this bill has no text and no summary, but I assume that those are coming, but no sense in letting this go without a comment.

Often, lawmakers want to reduce regulations by the EPA and other regulatory agencies because they make the cost of operating more expensive and, so the logic goes, it costs jobs. So, I went to the Bureau of Labor Statistics and downloaded their long-term unemployment data. I then went to the EPA web site and looked at the history of their major accomplishments, most of which are new regulations and some of which are things that they funded to help businesses and industries cope with new regulations. I then mapped the new regulations onto the graph of unemployment over time. I have colored the unemployment data by presidential administration (red=Republican; blue=Democrat) and plotted actions of the EPA or laws passed by Congress that involve the EPA as black diamonds at 8% unemployment(8.5% if there were two major initiatives occurring in the same month), so you can see where they occur but they don’t obscure too much of the unemployment data. Keep in mind that I plotted EPA rules as well as laws that were enacted by Congress that then fell to the EPA to enforce. Here is the graphic:

epa-and-unemployment

A few things you should notice is that, since the EPA’s founding in 1970, there have been more years under Republican presidents than under Democratic presidents. The other thing you will notice is that unemployment rate varies a lot, both among and within administrations. You will also notice that some administrations were more active in terms of EPA regulation than others (both Bush administrations rather inactive; Nixon, Ford, Carter and Obama more active).

What we don’t see is any evidence that periods of increasing regulatory authority lead to increases in unemployment rate. Clearly, unemployment rate is affected by lots of issues that are probably operating at much more global scales than the actions of the EPA can influence. Also, there are four presidents who enjoyed long periods (greater than half their time in office) of decreasing unemployment: Carter, Reagan, Clinton and Obama. During these administrations, Carter and Obama had more active EPAs while Reagan and Clinton had EPAs that were more moderate in their activity. The first Bush administration had very consistent increases in unemployment despite the lack of new regulations and the second Bush administration had fluctuating unemployment rates that increased drastically at the end of his tenure, in spite of a relatively non-regulatory EPA. What is true is that there are more (cumulative) regulations on the books now and we are currently enjoying pretty low unemployment. So, regulation does not negatively affect the unemployment rate, at broad scales. I am not saying that it might not affect certain businesses specifically, but, at broad economic scales, the effect on unemployment is undetectable.

Now,some caveats, this is not a quantitative time series analysis (but the lack of pattern seems pretty obvious). Second, as I collected this timeline, I discovered that most of the actions of the EPA were called for by Congressional action. The other rules that were proposed by either the EPA or by presidential executive orders (EOs) merely call for strengthening the standards originally placed under the purview of the EPA by legislation. Of these, most of them were rules put in place by the EPA while some of them were presidential EOs. But in all cases, these rules were regarding things that legislation had already called on EPA to regulate.

So, in conclusion:

1.   The actions of the EPA do not cost jobs, at broad economic scales.

2.   The EPA does not seem to be an activist organization. It is merely following mandates issues by legislation coming from the legislative branch of government.

3.   Unemployment rate seems to be affected by other factors (which should surprise no thinking person).

So, if your reason for wanting to terminate the EPA is that the EPA does things that increase the unemployment rate, you are living in an alternative reality, one that is not supported by data.

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