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The Jobs Vs. Environment False Tradeoff Rises Again

The technology of production continues to advance but conservative politicos and short-sighted business leaders and lobbyists continue to act as if every new environmental regulation simply adds costs to business. That is true if a factory makes no effort to modernize, utilize its wastes and increase energy efficiency. The standard thinking is that you can’t manufacture some items without polluting. Despite that mindset, many businesses do not pollute or are working to reduce their environmental impact. On the other hand, many production facilities such as the petrochemical plants in Louisiana’s “cancer alley” spew out toxins into the air, water and ground and make no effort to utilize those “wastes”; wantonly exposing the public to poisons. Some business leaders ask: Why bother fixing these disgusting factories? They make money and produce valuable chemicals. When pollution control devices are retrofitted in old, dirty factories they raise costs. But when new factories are designed using the analytic techniques of closed system industrial ecology, they tend to be more cost-efficient, energy efficient and cleaner. Still, these established industries don’t want to incur the cost and effort of reengineering their old poison-belching factories, they prefer to ride the wave of anti-regulatory ideology stirred up by Donald Trump and his pals.

American industry is in a global competition due to the global economy. Other nations pushing their businesses to modernize will beat these old, tired, petrochemical giants at some point in the future. The idea that regulation adds costs may be true, but its more important impact is that it empowers engineers to rethink production processes and technologies. We’ve seen that with automobiles, perhaps the technology that has been regulated more than any other. Today’s automobiles are safer and cleaner than ever. Regulation has incentivized new technology. We also see it with air conditioners which are less expensive and more energy efficient than they have ever been. There are many examples of new, better, and less polluting technologies.

Politicos like Trump and even Biden have a mid-twentieth-century macho and muscular view of economic power. To them, big factories with smoke escaping from stacks are an indicator of industrial might. The fact is that the nature of economic life has changed and that far more of our GDP is in services than in manufacturing, but as George Will indicates in a recent Washington Post opinion piece, the type of manufacturing has changed along with its efficiency. American factories make fewer consumer goods but make more high-value-added goods such as jet engines and medical equipment like MRI machines. Discussing the changing nature of American manufacturing, Will observes that:

“…in America, as in most other developed nations, manufacturing employment has fallen: Since 1980, the percentage of U.S. workers employed in manufacturing has been more than halved, as has manufacturing’s share of gross domestic product. The job losses are, however, largely — according to one study, 88 percent — the result of improved worker productivity (robots, computers, process improvements), which is an unalloyed good. For example, the steel industry’s output increased between 1980 and 2017 while its workforce shrank from 399,000 to 83,000.”

The jobs lost in manufacturing have been replaced by jobs in the service sector. Manufacturing in America is market-driven, a fact that both Mr. Will and I celebrate. The tragedy is not that we have lost manufacturing jobs, but that we have no system for retraining factory workers for the new economy.

The other tragedy is our addiction to the mid-twentieth-century idea that we can’t have manufacturing and a clean environment. The same creative force that increased steel productivity can be applied to creating manufacturing processes that don’t pollute and even cost less than those that do pollute. Take for example those belching smokestacks. Some of that smoke is from excess heat which could easily be repurposed to run a turbine and generate electricity. The rest of it includes waste chemicals that could be recaptured and possibly used in a different manufacturing process. Pollution is waste and a manufacturing process that reduces waste by utilizing it as a supply holds the potential for being lower cost and more competitive.

Nevertheless, the accepted wisdom that environment and jobs must be traded off persists in Gallup’s polling and is featured prominently in a recent piece by Maxine Joselow in the Washington Post. According to Joselow:

“The Environmental Protection Agency is preparing to significantly strengthen limits on fine particle matter, one of the nation’s most widespread deadly air pollutants, even as industry groups warn that the standard could erase manufacturing jobs across the country. Several major companies, trade associations and some Democratic lobbyists are trying to preempt the rule by suggesting it could harm President Biden’s reelection chances in key swing states. They say the tougher standard for soot and other pollutants could destroy factory jobs and investments in the Midwest and elsewhere, undermining Biden’s pitch that he has revitalized these areas more than Donald Trump, the GOP presidential front-runner. Public health advocates strongly disagree with the industry’s assertions. They say strengthening the soot standard would yield significant medical and economic benefits by preventing thousands of hospitalizations, lost workdays and lost lives.”

As Will’s piece indicates manufacturing jobs are being reduced due to automation and technological innovation, not environmental regulation. For the most part, an environmental standard impairs manufacturing when the plant is outmoded or marginal to begin with. The reduction in manufacturing jobs is due to the growth of the service and brain-based economy and the increase in low-value-added manufacturing abroad.

The false environment-jobs tradeoff has its origins at the start of our era of environmental regulation when pollution control required retrofits of existing technologies. That added cost to the product technology being retrofitted. But when energy efficiency and reduced waste are designed into new products and services, costs are lower rather than higher. Facts aside, business lobbying groups love the false trade-offs and environmental groups love to fight them. The environmentalists cite the health benefits of regulation and the increased productivity of healthy people. But that is essentially not the point. Regulation encourages modernization of production processes and if the regulation drives the costs of production so high that the factory must close, one might ask: Why is such a small change in production so devastating to a healthy enterprise? The answer is that in many cases the operation was marginal to begin with.

That doesn’t stop industry groups from raising and spending money to promote the environment-jobs trade-off. As Joselow’s Washington Post piece noted:

“The National Association of Manufacturers [NAM]… produced…[a] map showing that 200 counties could be out of compliance with a tougher soot rule. The group also ran a television ad in November warning that the EPA soot rule could “restrict growth and investment across America, threatening gains” from Biden’s economic policies. It aired 126 times in the D.C. area that month, according to the tracking firm AdImpact.”

What evidence does NAM provide to prove that these rules will depress investment? None. It is simply an article of faith, of accepted wisdom, that investors don’t like to invest money where businesses are regulated. While I’m sure the political and regulatory environment influences investment decisions, there are scores of other factors that are far more important.

Why do business and environmental interest groups fight the way they do? Because that is how they generate emotional concern among their constituents followed by donations. It is their business model. Those NAM ads were not cheap and I’m sure the organization and their consultants raised lots of money to produce and broadcast those ads. The problem is their alarmism is contradicted by reality. Any student of regulation knows that it takes about a decade from promulgation of a rule to its enforcement and even then, companies that make good faith efforts at compliance and modernization are given years to recover their sunk capital and eventually comply. The dire situation presented by business interest groups is sheer nonsense and I suspect they know that.

Political polarization has become a way of life here in America. Information and data take a back seat to ideology and tribalism. But the world we live in is getting more complicated and to navigate the complexity we need to find our way back to a factual basis for public policy.

Views and opinions expressed here are those of the authors, and do not necessarily reflect the official position of the Columbia Climate School, Earth Institute or Columbia University.

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