Citing a newly released Green Goods and Services (GGS) report by the U.S. Bureau of Labor Statistics (BLS), a Los Angeles Times headline recently observed “Green Jobs Grow Four Times Faster than Others.” The Huffington Post echoed an eco-friendly refrain with the headline: “Green Job Growth Outpaced All Other Industries 2010-2011.” Investor’s Business Daily challenged this Pollyannaish parade with an editorial asserting, “BLS Releases another Phony ‘Green Jobs’ Report.”

As the commissioner of the BLS when it created the GGS program, I’m okay with the decision to terminate the program, even with an insider’s perspective on the latest report—which estimates that there are now 3.4 million jobs associated with the production of green goods and services.

Some analysts believe that the United States cannot be internationally competitive, nor can the economy flourish, without a well-trained, well-paid workforce. While this is true, it is not enough alone. The workforce needs to make things of value if the economy is to grow and wages are to increase. The heart of economic growth is the allocation of scarce resources toward the most valuable uses. When considering the latest—and due to sequestration cuts, possibly the last—BLS statistics report on GGS employment, the reader should keep the following in mind: Much of the hiring within the GGS industry is due to government regulation.

The most basic economic cost of any regulation is that scarce resources like labor must be used in compliance efforts. Every person employed to deal with regulatory compliance—directly or indirectly—is unavailable to provide other goods and services of real value. Consequently, we have lower productivity, fewer goods and services, and lower income growth. Moreover, studies show that for every compliance job created—like many of those related to GGS—at least one production job within the regulated industry is lost. Furthermore, the number of jobs lost from indirect effects on associated industries is many times higher than the number of jobs created by regulation.

For example, the Environmental Protection Agency found its proposed “Toxics Rule” for the electrical generation industry would increase the price of electrical generation by 3.77 percent, which would reduce production and sales in 19 other industries. Acting much like a production tax, regulation pushes prices higher and reduces consumer purchasing power. If the EPA had continued its analysis, it would have found that for every single job lost in the electrical generation industry, 11 more jobs would be lost in related industries.

Federal agencies have never attempted to fully estimate the employment impact of their regulations. They simply highlight the benefits of regulatory changes, and may even cite the number of compliance jobs created as an added benefit, but ignore the much larger regulation-related job losses by assuming that these people are able to find new work elsewhere. This assumption, however, is erroneous. The evidence is quite strong that job displacement is very costly for individuals, families, and communities—and earnings loss may extend for decades. The intentional dismissal of the cost of job displacement remains a real shortcoming of agency efforts to promote only those regulations where the benefits are worth their costs.

While GGS regulations could be beneficial, since they may provide a more salubrious environment, they do not genuinely benefit the job market. The true value of GGS is found in their impact on the environment, and not in the number of people they employ. The goal should be to secure the largest possible environmental benefit at the lowest economic cost. Counting green jobs equates to counting part of the economic cost of achieving this environmental impact. We want this to be small, not large. Further, it is clearly underestimating the economic cost because every green job created will likely result in several jobs lost, accompanied by a ripple effect of undesirable consequences.

So why am I okay with the GGS program being a casualty of sequestration?

First, it misplaces emphasis on green jobs, when the focus of GGS should be on green output. Did the compliance jobs created by the regulations really improve the environment? Are there better ways to achieve the same results with fewer GGS jobs? And second, we should remember that every new GGS job created by regulation came at the expense of other jobs. Counting only the jobs gained gives a misleading impression that regulations have no deleterious effects on employment.

In the interest of transparency, the government should require that its regulatory agencies make a genuine effort to estimate and take into account the true economic cost of the thousands of jobs that can be lost from a single regulatory change.