This material was published by the Economic Policy Institute.
Uncertainty about regulation and taxes is not responsible for the slow pace of job growth in the United States, a new briefing paper by Economic Policy Institute (EPI) President Lawrence Mishel finds. Instead, the primary economic problem in the U.S. continues to be depressed demand for goods and services.
Though businesses have substantial cash on hand and are now a third more profitable than they were prior to the Great Recession, they are not using this money for new hires or for investments. Some politicians and business trade associations have argued that uncertainty about future regulations is discouraging businesses from hiring and investing. Regulatory uncertainty: A phony explanation for our jobs problemexamines what employers are doing in terms of investments and hiring and what employers are saying in surveys and finds the results do not support the uncertainty story.
A comparison of investment and private sector job growth between this recovery and the most recent recoveries suggests that future regulations and taxes are not the problem. Investment in the current recovery has increased more than in it had at the same time period in the prior two recoveries and roughly the same as it did during the 1980s recovery. In other words, this recovery is far more investment-led than the recovery under the pro-deregulation George W. Bush administration. Similarly, private sector job growth in this recovery looks much like job growth in recent recoveries, suggesting that businesses are not reacting to a new threat of potential regulations and taxes (the difference with this recovery is actually the loss of public sector jobs).
Furthermore, weekly work hours for private sector workers averaged 34.6 in 2007. In August 2011, they averaged 34.2, suggesting that businesses have access to readily available staffing without making new hires. The fact that weekly work hours are lower than pre-recession levels is more likely the result of low demand than uncertainty about regulations and taxes.
Finally, the regular National Federation of Independent Business (NFIB) surveys of small businesses found that the most common answer to the question, “what is the single most important problem your business faces?” was “poor sales.” And while a number of businesses also cited regulation, the numbers were not substantially higher than under Presidents George W. Bush or Ronald Reagan and were lower than under Presidents Bill Clinton and George H.W. Bush. Small business concerns about taxation were lower than under Reagan (second term), George H.W. Bush and Clinton and on par with concerns under George W. Bush.