Jobs and Regulation

December 02, 2011 By Florian Schach

EPA: How Economic Flow Is Limited With Jobs Regulation

In the midst of the American economic recovery, one solution that comes up often with regard to reducing our deficit, is to relax corporate regulations so they can produce and manufacture goods at a higher volume as well as create jobs. As one can imagine, it is met with much criticism not only by the White House and other governmental organizations, but by many American business owners as well. Economic stability and regulation, are in fact tied together.

Regulation as we know it can sometimes be called a necessary nuisance. Take a look at the EPA’s Boiler MACT regulations that guide factories, restaurants and dozens of other types of business across several industries. These guidelines require boiler units releasing hazardous emissions to be replaced. However, while government regulation seeks to protect citizens and the environment from grave pollution as well as danger, the installation of these replacement boiler units also bears some cost implications.Cost implications, seen by some manufacturers, as detrimental to business both in the short and long term.  According to the Council of Industrial Boiler Owners (CIBO), for every $1 billion spent on complying with Boiler MACT, 16,000 jobs will be lost and another $1.2 billion will be lost from GDP.

Many authorities suggest that regulations imposed by the EPA do not affect business or necessarily kill jobs. Most jobs however,  are not lost through massive regulation, but from smaller cuts which are imposed by cost of compliance. In addition, the cost of compliance with regulation often affects an ability to create more jobs due to a lack of funds or a fear of reinvesting.   Those factors are likely to have a significant impact on a company’s ability to meet production demands. In this case, when demand is not met, costs must be cut, and employee layoffs (not in “mass numbers”) is usually the way to do it.

It seems more often than not, the very thing that is meant to protect, actually harms us monetarily, and interrupts what should be a smoother flow into constant stream of economic stability.  Costs of regulation (old and new) continue to mount and affect businesses across the board. In the last three years, the cost of new regulations has totaled to date somewhere in the neighborhood of about $40 billion. When you compare that number with the 2000-2008 period, the costs of regulations totaled $60 billion.

As if that weren’t daunting enough, a yearly estimate of the cost of regulations, in addition to red tape, costs Americans over $1 trillion a year.  A change from this norm would be welcome. If this continues, there will not be much left to reinvest in our businesses and in ourselves as a country.

So what’s the solution?  We would never be able to do away with regulation all together, but our current system, cannot stay as is.  For now, a cooperative effort to at least review regulations thoroughly and see if the provisions fit the needs of business would be wise. It’s not ideal for either side, but it does accomplish two things.

First, some business owners are at least freed up from the severe governmental restrictions that may hinder business and even economic growth. Second, government would also still be able to do its job by protecting workers and also providing a number of jobs that prior to review or even reform would not be possible.

Just like a dam with water, regulation should allow for even control over job supply and the consistent flow into the economy. We need to control how much regulation we allow to affect our current economic system so that we can keep things running at a more normal rate.  Each component needs the other to succeed to ensure a stable future of economic prosperity.

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