Panel Paper: Moving toward More Balanced, Transparent Job Impact Analysis to Inform Public Debate

Friday, November 9, 2012 : 10:45 AM
D'Alesandro (Sheraton Baltimore City Center Hotel)

*Names in bold indicate Presenter

Michael Livermore and Jason Schwartz, New York University

Regulatory impact analysis is often seen primarily as an internal decisionmaking tool to be used by agency analysts to improve a rule’s efficiency.  But another crucial, sometimes overlooked benefit of regulatory impact analysis is its positive effect on the public policy debate:  it is a tool for transparency, conveying information to the public and providing a forum for stakeholders to engage in the rulemaking process.  Making federal agencies’ job impact analyses more routine, rigorous, balanced, and transparent augments both benefits.

Lately, the policy debate over regulations has been dominated by competing claims about job impacts.  Opponents of regulation argue that increasing production costs will lead to layoffs, while proponents of stronger protections counter that rules can result in businesses hiring new workers.  To bolster their positions, advocates on both sides have promoted economic studies that purport to examine the employment effects of regulations.  More often than not, these economic studies are conducted by outside consultants or the advocates themselves, and results are deployed in the policy debate without disclosure of underlying assumptions or the limitations of the models. Anecdotal evidence suggests when such outside economic studies attract enough media and congressional attention, the resulting political pressure on federal agencies can sway their regulatory decisionmaking.

Though federal agencies are increasingly preparing their own job impact analyses, to date these analyses are inconsistently conducted, poorly integrated into the broader cost-benefit analysis, somewhat inaccessible to the public, and ultimately less likely to shape the policy debate.  By making their job analyses more routine, rigorous, balanced, and transparent, federal agencies both can ensure their internal decisionmaking is based on accurate and complete information, and simultaneously can enrich the public debate by providing clarity to a controversial issue.

Federal agencies are beginning to rethink the place of job effects in regulatory impact analysis. Job impact analysis can and should be used by policymakers and advocates when weighing the costs and benefits of a rule.  If job impact analyses are to play a useful role in regulatory decisionmaking, then analysts, advocates, and policymakers should adhere to several best practices: 1) Job impact analysis is not an alternative to or substitute for cost-benefit analysis; 2) the difference between short-term and long-term unemployment should be taken into account when determining the economic costs of layoffs; 3) the potential for regulations to positively and negatively affect workers should be recognized; 4) economic models used to predict employment effects should be well suited to the type of regulatory effect being estimated; 5) uncertainty surrounding model predictions should be acknowledged by analysts and policymakers, and all assumptions and modeling choices should be disclosed.