By Ken Mantle CEF-2

 Industries in the United States are subject to a variety of regulations from federal, state and local agencies.  Certain industries inherently attract more regulation than others.  Manufacturing and in particular, metal finishing, are subject to some of the most stringent and cumbersome requirements.  But, no matter what the industry or who imposes the regulation, it is the consumer that pays the toll.

Everyone can remember the movie “Erin Brockovich” concerning the hexavalent chrome poisoning of a town.  Eventually the federal government imposed regulation after regulation on hex chrome.  Given the carcinogenic nature of this beast, one can certainly understand the desire to regulate the process out of existence.  Except that departments of the federal government like the military have never approved a substitute for chrome (or cadmium, etc.).  So the federal government still requires the use of hex chrome and most likely always will.  But due to the regulations that were designed to kill it,  the cost to produce the coating increases more and more every year and the cost increases are passed along to the customer, which in this case is the military, and the taxpayer foots the bill.

The Federal Register contains 81,405 pages of the federal rules and regulations that businesses are required to comply with and these regulations strain the economy by creating huge costs that business are obligated to meet and serve as a hidden tax on the economy.(1)

Between 2001 and 2011, 38,700 new regulations were added to the Federal Register. Of the over 4,000 new regulations that are currently being developed by various departments and agencies, 224 are estimated to cost the economy more than $100 million each. (1)

In a study by the Regulatory Studies Program at George Mason University’s Mercatus Center in 2001(“A Review and Synthesis of the Cost of Workplace Regulations”) researchers surveyed 100 manufacturers in the United States, ranging from 7 employees to 65,400 employees. The survey showed:

  • Complying with workplace regulations cost an average of $2.2 million per manufacturing firm or about $1,700 per employee
  • Smaller firms (less than 100 employees) faced higher costs than large firms (500 or more) with costs of $2,573 per employee and $1,530 per employee respectively

The survey revealed which types of regulations affect manufacturers the most:

  • Worker Health and Safety and Environmental regulations, including OSHA and the EPA, accounted for one-third the cost of compliance
  • Regulations governing employee benefits ranked second, making up 27% of the cost of compliance
  • Civil rights, labor standards, and labor-management relations regulations each made up about 10% of the cost of compliance.

A study on “The Impact of Regulatory Costs on Small Firms” by W. Mark Crain, Lafayette College for the Small Business Administration Office of Advocacy showed that small businesses continue to bear a disproportionate share of the federal regulatory burden. The cost of compliance with all federal regulations, economic, workplace, environmental, and tax is an average of $5,633 per employee for all sized firms. However, for companies under 20 employees, the cost was $7,647 compared to $5,282 for companies over 500 employees.(1)

Protection of our environment, our natural resources and most definitely our workers is both necessary and prudent. But like taxes, businesses don’t pay the cost for regulations, the customer does.  When the costs of regulations become so great that they can no longer be passed on to the customer, businesses cease to operate or they move, which makes scrutiny of any newly proposed regulations all the more vital to our economic growth and survival.