Government Regulations Do Not Have A Meaningful Impact On Unemployment

On America's Newsroom, Fox News promoted a Republican congressman's claim that a halt to government regulations will lower the unemployment rate, and then misled viewers over regulations' negligent effect on business and unemployment. In the last six years, regulations were responsible for less than 1 percent of all job loss, and small business owners have cited demand, not regulation, as their biggest obstacle to job creation.

Fox News contributor and National Review editor Rich Lowry claimed that because of the current economic situation, “it makes even less sense to pile new regulations on top of business to make the job of hiring people even more difficult than it is.” Fox News contributor Kirsten Powers added that “regulation of small businesses is a problem” and agreed that government regulations “have been too much.” Host Bill Hemmer then asked: “Why doesn't the White House do something about [regulation]? Unemployment's above 8 percent.”

In reality, government regulations have a negligible impact on the unemployment rate. In 2011, government regulation was the impetus behind only 0.4 percent of all jobs lost, according to the Bureau of Labor Statistics (BLS). For 2012 thus far, regulation is responsible for merely 0.28 percent of total new unemployment. Business demand for goods and services is responsible the vast majority of layoffs, as BLS shows:

From 2007-2009, during the economic recession, the BLS found that government regulation accounted for around 4,300 layoffs -- 0.3 percent of all those who lost their jobs. The Economic Policy Institute (EPI) noted that these numbers are especially significant when compared with the number of jobs lost during the recession due to regulatory failures:

The 4,300 figure itself deserves further context. It does not take into account any offsetting job creation that the regulations may have spurred, such as jobs created from the increased demand for the products from companies in compliance with the regulations. More broadly, the 4,300 figure pales in comparison to any accounting of the jobs lost in this period due to the regulatory failures that contributed to the economy's financial crisis.

That extended mass layoffs resulting from government regulations/intervention are a small sliver of all such layoffs is not an anomaly of tough economic times (when more layoffs naturally reflect the lack of demand). In 2007, a year of modest job growth, just 0.3% of extended mass layoffs were attributed to government regulation/intervention.

Small business owners agree. In a 2011 survey of about 1,200 small business owners, more than 80 percent cited economic factors and lack of demand as the primary obstacles facing their business.

Even Republican economic analysts admit that regulation does not notably affect employment. Bruce Bartlett, a senior adviser to President Reagan and President H.W. Bush, declared that “the number of layoffs nationwide caused by government regulation is minuscule and shows no evidence of getting worse during the Obama administration.” Bartlett went on to note that the number of regulations today is about the same as it was during the Reagan administration.

Economist Gary Burtless, currently with the Brookings Institute, pointed out that deregulation is more likely to adversely affect those currently employed than to lower the unemployment rate. From his interview with The Huffington Post:

Burtless said those [deregulation] proposals are more likely to impact those currently working than those seeking work.

“They may weaken the ability of current workers to negotiate for better working conditions or wages. They may lessen the ability of workers who want to join unions to do so in companies that are currently unorganized,” he said. “But it's just hard to believe that they create jobs in the short run.”

Nationally recognized EPI economist Lawrence Mishel further warns that arguing for less regulation “requires its proponents to have a particularly peculiar form of amnesia, given that the worldwide economic collapse we are now experiencing is due to a failure to sufficiently regulate financial markets.”

Nevertheless, Fox hosts have consistently pushed the falsehood that government regulation negatively affects job creation.