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Industry Jobs Studies Are Imprecise

Economists acknowledge that models used for calculating estimates of job losses and other effects from a particular policy depend on the assumptions fed into them.

WASHINGTON (AP) -- Industry officials say with confidence that 7.3 million jobs will disappear if the Obama administration goes through with tighter rules to reduce smog. The industry-sponsored researcher who came up with that number isn't so sure.

"There's uncertainty around that," economist Don Norman said of the "shockingly high" job loss number he extrapolated using a study sponsored by the oil and natural gas industry's American Petroleum Institute and covering just 11 states.

"Even if the numbers are half of that, the number is huge," he said.

Norman, like most economists on any side of any issue, is quick to acknowledge that economic models used for calculating estimates of job losses and other effects from a particular policy depend on the assumptions fed into them, and that the reality can be far different.

Yet in testimony before House committees now run by anti-regulation Republicans, industry witnesses repeat numbers from imprecise economic models. Members of Congress often cite the same figures without the researchers' caveats.

"Some models are garbage in, garbage out. If you put in junk . you get junk coming out in the end," said John Irons, a researcher for the self-described left-of-center Economic Policy Institute.

Republicans have made a political issue out of what they refer to as job-killing regulations in a bad economy. Industry studies portray dire job losses from a wide range of proposed regulations, from rules that would govern the Internet to restrictions on student loan terms for students at for-profit colleges.

The potency of that argument hasn't been lost on President Barack Obama, who ordered a review of regulations that already has produced some rollbacks. The House, in legislation passed this month to finance the government through September, voted to shield greenhouse-gas polluters, coal companies and telephone and cable providers as well as the for-profit colleges from regulators.

In at least one case, the government itself got into the act. The Interior Department's experts estimated their proposal for protecting streams from coal mining would trim coal production and cost the jobs of some 7,000 of the nation's 80,600 coal mine workers.

Researchers defend their craft by insisting they make intelligent assumptions based on knowledge of the industry they study. But unlike the certainty expressed in congressional testimony, they know their limits.

"If anybody who does economic work tells you they know everything, they're full of crap," said John Dunham, whose research company conducted a study for the meat industry. He concluded that an Agriculture Department marketing proposal could cost the industry 104,000 jobs.

Norman came up with the potential loss of 7.3 million jobs by assuming the worst-case scenario for industry: The Environmental Protection Agency adopts the strictest possible limits on smog-inducing ground ozone and some plants close rather than install expensive pollution-control equipment.

The EPA, however, proposed a range of ozone levels it may adopt. It's not known how far the agency will go in its final rule.

Norman's study for Manufacturers' Alliance/MAPI accepted the compliance cost estimates from the oil and gas industry's 11-state study to estimate that industry costs would soar to $1.013 trillion annually between 2020 and 2030 under the toughest possible smog limits. The early study concluded that in 2020, the 11-state costs of complying with the strictest possible standards for ozone would be $187.1 billion, with job losses of 1.45 million.

There were other major differences between the two studies:

-- The manufacturing group's nationwide study assumed that some plants would close rather than install expensive pollution-control equipment. The 11-state study assumed plants would stay open and install the equipment. The EPA makes the same assumption and says that industry innovations usually bring down the cost of control equipment.

-- The alliance did not factor in efforts to lower ozone levels by reducing auto emissions; the petroleum group's study did. It costs far less to test vehicle emission systems -- motorists usually pay for inspections -- than for industry to install expensive control equipment.

-- The alliance did not factor in areas of the country that could devise ways to meet air-quality standards without major job losses. In setting ground ozone standards, the EPA gives states leeway in devising ways to meet the air-quality requirements. The 11-state study only researched areas that may need expensive additional measures to comply with a new air-quality rule.

Those opposed to government regulations rarely mention the potential benefits to society. The EPA, for example, estimated that its proposed smog standards could prevent up to 12,000 premature deaths and 58,000 cases of aggravated asthma, and save as much as $100 billion in health costs.

Some industry models don't take into account job gains. Someone has to manufacture and install new anti-pollution equipment. If meat sales drop, purchases of fish or other foods may increase, ensuring that a supermarket would not lay workers off.

"It's not up to me to make the other guy's case. It's up to them to make their case," said Dunham, who did the meat industry study.

Researcher Stuart Sessions studied potential costs of an Occupational Safety and Health Administration noise-reduction plan that has now been withdrawn. Hired by the Coalition for Workplace Safety, composed of employers and trade associations, Sessions said he did take into account jobs that would be created if new noise-reduction equipment would be required.

His model produced a wide range of possible scenarios: job losses from a low of 8,300 to a high of 200,000.

Sessions acknowledged the limits of his research.

"I'm waffling, but that's a responsible thing for an analyst to do," he said. "It's important to try your best to come up with estimates of costs and benefits. It's important . to be fair and honest about the uncertainties and let policymakers decide, 'Is it worth the cost?'"
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