Thursday, January 22, 2015

Title II Regulations Would Negatively Impact Jobs

Last week, Will Rinehart released a report entitled “Title II Reclassification Negatively Impacts Jobs and Investment.” This report provides additional evidence regarding the impact of Title II regulations on employment to a Perspectives from FSF Scholars that I wrote in December 2014 entitled “Title II Would Not Just Harm Consumers, It Would Harm Workers Too.”
Rinehart used investment data from a paper by Kevin Hassett and Robert Shapiro entitled “The Impact of Title II Regulation of Internet Providers On Their Capital Investments,” which I blogged about here. Among many of the Hassett and Shapiro’s findings, one was that Title II regulations would decrease investment by $11.8 billion in 2019, the final year of their estimation. Using a multiplier provided by the Bureau of Economic Analysis, Rinehart calculated that an investment decline of $11.8 billion in 2019 would result in 174,233 fewer jobs than what would exist if Title II regulations were not adopted. Rinehart also made the following clarification:
           Since the US has an extremely dynamic labor market and due to the very nature of multipliers, investment could shift toward other industries, so this number applies only to broadband employment. However, the forgone investment would also come at the expense of highly technical careers, which would ultimately limit positive spillovers like new companies in these evolving markets.
As I mentioned in a blog in early January, the increased fees that would be required from Title II regulations should depress investment by more than the amount Hassett and Shapiro projected, because as the price of broadband increases, the amount consumers demand decreases. This would disincentivize Internet Service Providers from investing and could ultimately lead to even more jobs lost, and/or jobs displaced into other areas of the economy.
The following quote from Title II Would Not Just Harm Consumers, It Would Harm Workers Too” sums up how the FCC regulators and elected officials should approach Title II:
If a regulation (that does not correct for a market failure) affects employment and wage levels in the market (whether up or down), the impact should be seen as a negative effect on the economy. If these shifts in the labor market were a positive market outcome, they would have occurred absent the regulation.
“Jobs!” should not be a mere political slogan. Public officials, including regulators, should focus on the impact of regulations on employment. Any public official who says he or she wants a healthy labor market should be against Title II reclassification because such regulations likely would have serious negative impacts on many workers.
Job reallocation is not a positive impact of regulations and this report by Will Rinehart provides further evidence to the negative impacts of Title II regulations on investment and employment.