NCPA - National Center for Policy Analysis

Joblessness and Regulation: The "Mass Layoff" Fallacy

December 1, 2011

Senate Majority Leader Harry Reid recently argued that the idea that regulations cost jobs was a "myth," pointing to a 2011 Bureau of Labor Statistics poll of employers who had recently laid off 50 or more employees.  Only 0.3 percent of respondents cited government regulation as the primary reason for the layoffs.  However, the statistics are of doubtful accuracy and have little to do with the primary cause of joblessness: the lack of job creation, says James Gattuso, a senior research fellow at the Heritage Foundation.

  • The poll was taken only among employers who had laid off 50 or more employees at once, yet many small businesses do not even have 50 employee and many large corporations do not lay off workers en masse.
  • The poll focused on job losses, yet this is not the true culprit of persistently high unemployment -- since late 2009, gross job losses in the economy have been below their prerecession levels.
  • The poll should instead have focused on the lack of job creation -- in the first quarter of the year, only 6.3 million new jobs were created, which is far below the 7.6 million being created each quarter before the recession.

The poll's inaccuracies are also clear in its lack of comprehensiveness, in that it forced responding employers to assess exactly why they had been forced to cut their workforce.  In reality, such respondents have little direct knowledge of such matters.  While they may be able to say that demand slumped, they likely do not know if this is because of a loss of consumer confidence or if a recent government regulation made their product less attractive.  This speaks to the overall danger of regulations: their pervasiveness and aggregate effect is difficult to track and assess.

A more accurate poll would focus on general employer concerns, as these hint at why job growth has been so stagnant.  In a recent Gallup poll, the "myth" cited by Harry Reid seems very real:

  • Twenty-two percent of respondents stated that government regulation was their primary concern.
  • Fifteen percent of respondents cited consumer confidence.
  • A mere 12 percent pointed to "lack of consumer demand."

The results of this poll speak to the truth of the damage done by regulatory policies, as they decrease employer confidence and reduce job creation.

Source: James Gattuso, "Joblessness and Regulation: The "Mass Layoff" Fallacy," Heritage Foundation, November 21, 2011.

For text:

http://www.heritage.org/Research/Reports/2011/11/Jobs-Unemployment-and-Regulation-The-Mass-Layoff-Fallacy

 

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