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How Do Regulations Impact Your Business?

Posted: 10/07/10 at 5:22 PM

By Dan Moss, Senior Manager of Government Relations

In letters sent to congressional leaders in September, SOCMA called on Congress and the Administration to refrain from considering further, or advancing, legislation which would add to the regulatory burden facing small manufacturers, for the remainder of this year.  Citing TSCA reform and product substitution requirements in chemical security legislation as two examples of such burdensome legislation, SOCMA also referred to a 2005 Small Business Administration (SBA) study which detailed the economic impacts of regulations on small businesses.  An updated version of that SBA study, released on September 23, further buttresses SOCMA’s case. 

The report, which can be found here, contends that the annual cost of the federal regulations in the U.S. in 2008 was more than $1.75 trillion.  Several points particularly stood out from SOCMA’s perspective:
  • “Small businesses, defined as firms employing fewer than 20 employees, bear the largest burden of federal regulations.  As of 2008, small businesses face an annual regulatory cost of $10,585 per employee, which is 36% higher than the regulatory cost facing large firms” (500 or more employees) and 42% higher than the cost facing mid-sized firms. This distribution of costs is similar to the findings from the 2005 report.
  • Environmental regulations in particular put a disproportionate burden on small businesses, with the cost per employee of environmental regulations more than 4 times higher in small firms ($4,101) than in large firms ($883).  The gap is almost as significant for medium-sized firms ($1,294)
  • Overall, environmental regulatory compliance costs make up $281 billion out of the $1.752 trillion overall regulatory cost estimate, the second biggest component of the total.  Compliance with economic regulations is by far the biggest piece of the puzzle, totally over $1.2 trillion.
  • The manufacturing sector (and a sector labeled as “other”) bear the largest regulatory burdens based on all three metrics studied – cost per firm ($688,000), cost per employee ($14,000), and cost as a share of payroll expenses (29%)  Health care, services, and trade were the other sectors studied.
  • Within the manufacturing sector, environmental regulations make up the biggest portion of the regulatory costs per employee ($7,211 out of $14,070 total costs.) 
  • The contrast of environmental costs per employee between small, medium and large firms within the manufacturing sector is even more jarring:
  • $22,594 per employee for small businesses, $7,131 for medium, and $4,865 for large.  The $22,594 figure for small firms is by far the largest cost per employee across types of regulations and industry sectors.
Are small businesses being overregulated?

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