Tuesday, February 12, 2013

Another Study Confirms That Taxes And Regulations Aren’t Holding Back Job Creation

A favorite GOP talking point is that a slew of regulation and taxes are preventing employers from creating jobs, which explains the stubbornly high unemployment rate. “By pursuing a steady repeal of job-destroying regulations, we can help lift the cloud of uncertainty hanging over small and large employers alike, empowering them to hire more workers,” said House Majority Leader Eric Cantor (R-VA). “Business owners are reluctant to create jobs today if they’re going to need to pay more tomorrow to comply with onerous new regulations,” claimed Sen. Susan Collins (R-ME).

But a new study from the San Francisco Federal Reserve finds that this line of thinking is largely bunk:
Figure 3 shows there was almost no correlation between job growth in a state from 2008 to 2011 and the increase in the percentage of businesses citing regulation and taxes as their primary concern. In fact, if anything, the correlation is positive.
States in which businesses increasingly cited regulation and taxes experienced higher job growth, although this correlation is not statistically significant. The lack of correlation is not a matter of the timing we choose. For example, there also is no strong correlation if we examine the 2009–11 period or the 2010–11 period instead.

As this chart shows, there is basically no relationship between businesses citing increased regulations and taxes and higher unemployment rates:

In fact, some studies show that far from killing jobs, regulations help create them and help boost economic growth.

Instead, the San Francisco Fed shows that lack of job creation is tied to a lack of demand — customers don’t have any money to spend, so businesses have no reason to expand. “U.S. counties with high household debt levels coming into the recession are the same counties with depressed levels of employment in the nontradable sector today,” the study said.

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