Saturday, May 8, 2010

CBO on Employment Effects of Climate Policies

This past week, the Congressional Budget Office (CBO) released an issue brief in which it assesses (just three) studies projecting  the effects on employment of policies to regulate greenhouse gas (GHG) emissions. Not surprisingly (to anyone who has not drunk the kool-aid on so-called "green jobs"), the CBO found that
total employment during the next few decades would be slightly lower than would be the case in the absence of such policies. In particular, job losses in the industries that shrink would lower employment more than job gains in other industries would increase employment, thereby raising the overall unemployment rate.  
The key word in that quote is "slightly." The CBO acknowledges that most workers would only be temporarily displaced as those "who lost jobs would find new ones."

The bottom line is that regulatory policies - not just climate policies - entail economic costs, including to employment. All environmental regulations both cost and create jobs. Sometimes they cost more jobs than they create. The idea that shifts in production - whether due to regulations or technological changes - can occur without trade-offs, so that no one in society suffers, is a myth. Unfortunately, the Obama Administration has some responsibility for propagating that myth with its talk about "green jobs" and a "green economy."

If the government's only goal is to maximize employment (rather than social welfare), it probably should not enact climate legislation. (It should also do a lot of other things, including abolishing all existing environmental regulations, announcing the immediate opening of the Arctic National Wildlife Refuge and all reaches of the US coastline for oil exploration and drilling, selling all the timber in Yellowstone National Park (among others), abolishing the minimum wage, and repealing laws prohibiting child labor).

If, however, the government's goal is to avert potentially great social and environmental harm, then it should enact a modest regulatory program to reduce greenhouse gas emissions, even if it has some temporary, marginal effect on overall employment.

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