Monday, October 24, 2011

No evidence employers not hiring because of regulations.

Dean Baker, co-director of the Centre for Economic and Policy Research, examined the often repeated Republican claim that federal regulations are job killers.  He found no support for regulations having any significant impact on employers’ decisions to hire.

Baker summarizes the most popular version of the “regulations are job killers” argument this way: 

The argument is usually that companies have enough demand for labor that they would be hiring now, but because of existing or expected regulations, such as President Obama’s health care plan that mostly takes effect in January of 2014, they are declining to hire more workers.

If this was true, says Baker, we would expect to see the following:

First, companies would be increasing hours per worker as an alternative to hiring.
Fact:  The average workweek is still shorter than pre-recession levels.  Employers are not requiring workers to work longer hours.

Second, employers would be hiring temporary workers as an alternative to full time permanent employees.
Fact: Temporary employment is 400,000 below pre-recession levels.

Third, the sharpest reduction in employment would be among companies most affected by regulations, particularly Obamacare.
Fact: Firms employing less than 50 workers aren’t affected by Obamacare and most large firms aren’t affected either because they already provide health coverage that exceeds what is in the bill.  Therefore, we would expect medium size firms to be most affected by Obamacare regulation and show the sharpest reduction in employment.  However, there is no clear pattern in hiring by firm size. 

Fourth, firms with long-term employment should have the greatest reduction in hiring since firms with high turnover could just not hire new workers if regulations became a burden.
Fact: Industry groups like manufacturing and health care that hire long-term are adding workers while industries like restaurants that have high turnover are hiring at just slightly over half of the pre-recession pace.

Finally, if regulations were the chief reason firms weren’t hiring, we would expect them to complain about regulations in surveys.
Fact: Employers do not list regulations as a major cause for not hiring more workers in national surveys.  For example, only 14 percent of respondents to a National Federation of Independent Businesses (NFIB) survey listed regulations as a major obstacle to hiring.  That’s about the same percent complaining about regulations in NFIB surveys prior to Obama’s election.

Bottom line:  The “Regulations are Job Killers” argument is totally bogus.

Read Baker’s analysis here:

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