Last week, Senate Majority Leader Harry Reid (D-NV) took to the Senate floor and made a bold assertion–that there isn’t any evidence that regulations cost jobs, citing statistics from a Labor Department report that “last year, only three-tenths of 1 percent of people who lost their jobs were let go principally because of government regulation or intervention.”
In a new paper, Heritage’s James Gattuso takes Reid’s assertion head on, writing “The statistics are of doubtful accuracy and have little to do with the primary cause of joblessness in the U.S. economy today: the lack of job creation.” Gattuso explains the central flaw in the report:
Employers are asked why they let employees go, not why they did not expand. No one asks would-be entrepreneurs why they did not start an enterprise last month or inventors why they did not invent a product.
But when employers are asked about their concerns, they increasingly cite regulation. In a survey of small businessmen conducted last month by Gallup, for example, government regulation topped their list of concerns, cited by 22 percent of respondents. Consumer confidence was a distant second at 15 percent, followed by “lack of consumer demand” at 12 percent.
Of course, no one argues that the drop in job creation is due solely to regulation. But regulation is certainly a big part of the problem—placing a burden on anything will decrease the amount of it that is produced, and regulatory burdens have increased at record rates in the past few years. Reducing these regulatory costs should be part of the jobs solution.
Read more of Gattuso’s paper, “Joblessness and Regulation: The “Mass Layoff” Fallacy” at Heritage.org.