Beetles vs. Jobs

Regulations are strangling job growth

Businesses are sitting on about $2 trillion in cash. That’s enough to fund 27 million jobs, or reduce unemployment to near zero. So what’s keeping them from spending? The economy is slowing from what was already a very tepid recovery. But even with greatly reduced expectations, job growth coming out of the recession has been far below what should have occurred based on historical precedents.

For a clue why this is, look no further than the environmental impact statement report on the proposed pipeline to bring crude oil from Alberta to refineries in Oklahoma and Texas. The project is estimated to create more than 138,000 jobs and invest over $20 billion in the U.S. economy. However, those benefits have to be weighed against such critical factors as “the impact on beetles” — a subject of considerable study in the report, among other things. The report concludes that there is no significant environmental impact because of the project, but tell that to the beetles. Since they have no legal standing, the government has come to their defense. The EPA is doing everything and then some to block the project.

I’m From the Government and I’m Here to Help

When it comes to job creation, the government’s public position is completely at odds with its actions. Take the newly minted ozone regulations proposed by the EPA. The agency itself admits that (I kid you not) the technology required to comply with its standards doesn’t exist and that the benefits are based on highly dubious assumptions. And just what are the benefits that the EPA seeks to achieve? A reduction in the concentration of ozone in the atmosphere by 10 parts per billion. And just to drive home the point about how smart an idea this is, EPA administrator Lisa Jackson concedes that scientific support for the new standards is “limited” and any benefits to people or vegetation (yes, vegetation) may be hard to measure.

Conservative estimates of the impact of these regulations show that it will result in the loss of over a million jobs in the already reeling construction industry over the next 10 years, as businesses are required to invest close to $1 trillion to meet the requirements. The EPA projects that the new standards would force about 20% – 30% of U.S. counties into non-compliance, requiring them to spend on expensive emissions control technologies (yet to be developed) or failing that, take industrial capacity offline … in other words, force several hundred thousand people into unemployment. Well, we already have 25 million people unemployed, so what’s a few hundred thousand more? Who would even notice?

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And the list goes on and on. We also have the boondoggle involving the National Labor Relations Board’s opposition to Boeing setting up a huge manufacturing plant in South Carolina, instead of Washington — since the South Carolina facility will be a non-union site. That the plant will create 13,000 jobs is apparently not a consideration for the NLRB.

These are not isolated examples. Regulations of all sorts exist today to limit just about any type of project. The President keeps talking about funding “shovel-ready” projects, but it takes between three and seven years from the time a project is conceived to the time the first shovel can get into the ground, because of regulations. Amazingly, the government is unwilling to even help its own agencies that want to do something about job creation. The pipeline project mentioned above is being championed by the State Department since the oil originates in Canada. It was first proposed in 2008, but three years later the project is still in limbo because the EPA refuses to accept the claim that there’s little impact on beetles, and a much greater one on humans.

But then, no price is too high to pay if it means fewer parts per billion of ozone or happier beetles.

Raghav Singh, director of analytics at Korn Ferry Futurestep, has developed and launched multiple software products and held leadership positions at several major recruiting technology vendors. His career has included work as a consultant on enterprise HR systems and as a recruiting and HRIT leader at several Fortune 500 companies. Opinions expressed here are his own.

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19 Comments on “Beetles vs. Jobs

  1. That’s a pretty big leap: businesses are sitting on $2 trillion in cash but it’s the government that’s keeping them from hiring people? I think you used an ideology to twist the facts. You could say that the development of the technology used to reduce the ozone output would create new jobs. Or better still, and I know your political bias is going to make you freak out on this one: raise corporate taxes on capital holdings so companies are discouraged from hoarding. You could even give them a tax break for job creation if they can’t take the initiative themselves but please don’t twist the fact that businesses, not government, are sitting onthe money.

  2. Murray used just the right word: ideology.

    Raghav, if you want traction posting right wing polemics, at least take the time to research a position and craft a good argument. This read like the noodlings of a typical Rush caller….

    I don’t care if ERE is used for politics – it’s a hardball world- but don’t be boring about it !

  3. I agree with Murray that your bias is showing. There are many reasons that businesses are sitting on $2 trillion in cash and not creating jobs. Perhaps they don’t want a successful recovery yet, in order to put a president into office that is more friendly to them? Just a thought…..

  4. This is Bull Raghav. There are many long term environmental reasons to question this pipeline including the enormous costs of extracting oil from the tar sands and the eventual damage to the environment from burning this carbon. Read a book or maybe apply for a job on Fox News.

  5. You certainly have fired people up on this! And it does seem political in nature rather than HR-related. Still, I wanted to respond … I do not agree. I do question the environmental impact (which is far greater than mere beetles I have to believe) but I question even more whether these are jobs that we want. And those jobs will disappear after the pipeline is built. Oil is the energy of the past. I’d prefer we invest more in green and clean energy which will support jobs for much longer into the future.

  6. This is a seriously ignorant piece. Alberta and Texas/Oklahoma have severely threatened their entire ecosystems by what they have done to get a nonrenewable form of energy that is also depleting our clean water supply and threatening the health of the people, the animals, and the land. Alberta’s tar sands operation creates 60% more GHG than regular oil drilling, not to mention the cancer rates that have gone up in the communities. People need to wake up and insist on updating our energy sources to safe, renewable forms and invest in smart grid so that we can use the plentiful solar and wind energy. The state of Texas could profit like CRAZY if they invested in solar and wind instead of threatening life as we know it through oil. They could power the entire country, imagine turning around their reputation by doing that, not to mention spark the economy and jobs!

    http://ngm.nationalgeographic.com/2009/03/canadian-oil-sands/kunzig-text

  7. Beetles: It’s been a hard days night … and I’ve been eating this log. Nice article Raghav, keep them coming. Love a good discussion. For those who argue that ideology has no place in HR, you need to get your head out of the sand and realize the impact it has on our industry. You may argue that we shouldn’t build the pipeline to protect these beetles, but it WOULD create jobs. It has impact. Raghav is talking about jobs and HR and recruiting, it’s very relevant.

  8. Martin
    You can like most Keynsian revisionists discard the laws of supply and demand that Raghav has eloquently invoked here to explain the flight of capital from domestic hiring, however, that doesn’t change the reality that the capital is indeed going elsewhere, leaving many otherwise productive people marginalized.

  9. Gregg, first off, people with capital dont hire people, they use capital allocation tools (such as the stock market) to invest in directions of likely ROI, which may or may not involve domestic hiring. A case can be made that our allocation systems are hopelessly broken and corrupt, and the decision to de-industrialize the country was hardly made by Keynsian revisionists, whoever we may be.

    Secondly, even hiring authorities don’t hire on a typical ROI model. They hire on trends, with major variations by industry, technology and growth rate independent of a hard ROI number.

    Rather than platitudes, non-partisan research on the subject might be more illustrative – see “The Establishment-Level Behavior of Vacancies and Hiring” 2010 by Davis, Faberman, and Haltiwanger. It’s an NBER working paper (#16265).

    Finally, the notions that always business knows what’s good for it and that there is no space between the Thunderdome and North Korea are not borne out by history. Prudent regulation works to increase overall wealth.

    You bet I’m a Keynsian when it comes to the truth about money and the economy: It’s all just a state of mind. The world’s top economic brains can’t even agree on the simple question “what is money?, let alone manage the “animal spirits” that control human affairs.

  10. Hi Everybody,

    I’m back. (Did you miss me?)
    While I often disagree (and do here again) with Raghav’s conservative economic statements, I believe he is an articulate and thoughtful spokesman for them and that they are in fact quite relevant as they relate to job creation…

    As to the content- I’d like to send out the idea that business does not object to regulation per se, but rather to ambiguous and unclear regulation, and regulation which they did not largely create/control themselves. To remedy the latter, a number of powerful business organizations have formed the American Legislative Exchange Council (ALEC). ALEC is a group that brings together state legislators and representatives of corporations to draft model bills that can then be introduced at the state level of government. An archive of ALEC documents was recently leaked to the Center for Media and Democracy. (http://www.npr.org/2011/07/21/138537515/how-alec-shapes-state-politics-behind-the-scenes, http://www.jimhightower.com/node/7464)

    Cheers,

    Keith “Doesn’t Live in Laissez-Fairyland” Halperin

  11. Any time clean air and water impose costs on doing business, it’s considered burdensome regulation. But I remember seeing in Pico Rivera CA in 1987 that the air was brown. When I was out that way on contract a few years ago, I could see it was no longer so.

    Business is not foresightful; it considers the larger world an appendage to profit and little more. Business was not always so; many firms that now grasp after pennies were ONCE renowned for spending more to have employees proud to work for them — and enthusiastic enough to make the firm happy to show everyone how well they were treated.

    Some rare firms are proud of the communities of which they’re part, and can boast how good those communities are as well as their own prowess. A few might even reflect well on their COUNTRIES.

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