Environmental Regulation and the Cost of Job Displacement

Andrew K. Hildreth
University of California – Berkeley

Friday, March 22, 2002
3:00 PM – 4:15 PM
Saunders 515

Abstract

Data from the Displaced Worker Supplement linked to Environment Protection Agency data are aggregated at the industry/state level to examine the impact of environmtal regulation on the displacement of workers and the cost of that displacement. Changes in the environmental regulation of different industries, across states, are used as a mechanism that randomly displaces workers from their job, independently of their own actions, or industry and area demand shocks. The results indicate that environmental regulation did have an effect on the displacement of workers, with approximately 60000 workers being displaced because of the regulation over the years 1979-92. Workers displaced for reasons of environmental regulation are no worse off than other displaced workers.
It appears that environmental regulation, while displacing workers (in which individual cases may suffer some considerable non-pecuniary costs), does not affect their earnings capability vis-à-vis other displaced workers. The cost of job replacement from environmental regulation (as a wage difference for an average year over the 1979-92 time period) appears to lie in the range of $80 to $136 million (in 1992 dollars). This is a limited cost estimate and does not account for workers in unemployment at the time of the survey, the potential continued loss of wages over the workers career path, or any other cost imposed on workers and their families.