Late last year, the U.S. Department of Labor proposed an important and controversial federal regulation without a serious analysis of its costs and benefits, and of its likely effects on low-income American workers. That's a big mistake, a disservice to the public and a bad precedent. It might cause legal trouble as well.
The absence of such an analysis, including numbers, is inconsistent with decades of practice supported by both Republican and Democratic presidents. Under a series of executive orders starting with President Ronald Reagan and most recently reaffirmed by President Donald Trump, presidents have required all executive agencies to accompany "major" rules with a "regulatory impact analysis." That analysis must quantify the costs and benefits of both proposed and final regulations.
At least as much as their Democratic counterparts, Republican presidents have insisted that the Office of Information and Regulatory Affairs should oversee the regulatory process to ensure that potential costs and benefits are revealed to the public.
That's important. Regulations usually shouldn't go forward unless the benefits justify the costs. Cost-benefit analysis isn't perfect, but it's the best method we have for assessing the consequences of what the government is proposing to do. Without a catalog of anticipated costs and benefits, we can't know whether a regulation is likely to help people or hurt them.
Clear presentation of anticipated consequences, for public scrutiny and review, can also help correct mistakes — and show an agency that it ought to consider different solutions to a problem (and possibly no regulation at all).
Finally, analysis of costs and benefits can reduce the influence of political dogmas, unreliable intuitions and interest-group power. If an agency is required to assess the actual effects of its proposals, and show that on balance they are good, everything else starts to look less relevant. The government's attention is focused on the right questions.
I was privileged to serve as administrator of the Office of Information and Regulatory Affairs from 2009 to 2012, and I saw, close up, the immense importance of cost-benefit analysis to democratic accountability. The obligation to produce some kind of cost-benefit analysis is a crucial safeguard.
Which brings us to the Department of Labor, which has proposed to rescind a 2011 regulation that requires tips to be treated as the property of employees who receive them. Under the 2011 rule, employers may not direct employees to turn over their tips. The new proposal would eliminate that prohibition. Among other things, it would allow employers to require "tip pooling arrangements" in which, for example, waiters and waitresses would have to share their tips with kitchen workers.
No one should deny that the Trump administration may reconsider previous regulations. It deserves great credit for its effort to cut regulatory costs. But the tipping proposal came without sufficient analysis of its effects. Would workers end up losing a lot of money on balance? Would employers end up taking significant amounts of the tips?
