Much of the attention regarding the burden of complying with federal regulations is directed toward very small businesses or large corporations. But middle-sized companies too big to be exempted from some regulations and too small to employ major resources or economies of scale also face heavy burdens. Thomas Hopkins of the Rochester Institute of Technology estimates:

• The annual cost of regulation for companies with more than 500 employees averages $2,921 per employee.

• For companies with 20 to 499 employees, the regulatory burden per employee averages $5,195, or 78 percent more than for the larger companies.

• Companies with fewer than 20 employees have the highest unit compliance costs, $5,545 per employee, but this is only 4 percent more than the costs to mid-sized firms.

Rather than reduce the burden by eliminating regulations, Congress has arbitrarily exempted different sizes of companies from various regulatory acts. For example:

• If a business employs fewer than 10 people, it is exempted from the procedures for Toxic Chemical Release Reporting under the Emergency Planning and Community Right-to-Know Act.

• A company with a federal contract or subcontract of $25,000 or less doesn't have to comply with the Drug-Free Workplace Act, and one receiving less than $10,000 doesn't have to comply with the Rehabilitation Act.

• Companies with fewer than 15 employees are exempt from the Americans With Disabilities Act and from Title VII of the Civil Rights Act of 1994.

• Companies with fewer than 20 employees are exempt from the Age Discrimination in Employment Act.

• In fact, some small firms are reluctant to grow because additional employees may force them to pay additional compliance costs and a cluster of federal regulations takes effect when a company hires its 50th employee.

Source: Murray Weidenbaum, "Government Regulation and Medium-Sized Business," Contemporary Issues Series 77, March 1996, Center for the Study of American Business, Washington University, Campus Box 1208, One Brookings Drive, St. Louis, MO 63130, (314) 935-5630.