NCPA - National Center for Policy Analysis

What Do Federal Regulations Cost the Economy?

September 15, 2014

American manufacturers employ more than 12 million Americans, yet they face massive regulatory costs that dampen investment and negatively impact employees. A new report from Mark Crain and Nicole V. Crain for the National Association of Manufacturers details exactly how manufacturing companies are hurt by federal regulations.

Federal regulations cost a whopping $2.028 trillion in 2012. While the average American company pays $9,991 per employee, per year, to comply with these federal rules, the average manufacturer pays even more: $19,564 per employee each year. The costs are even higher for small manufacturers (those with less than 50 employees), who spend $34,671 per employee, per year, complying with federal regulations.

In general, federal regulations fall into four major categories. Of the more than $2 trillion in regulatory costs in 2012, more than $1.4 trillion were economic regulations, while $330 billion were environmental and $159 billion involved tax compliance. The rest dealt with occupational safety or homeland security. According to the manufacturers surveyed in the study, firms' largest regulatory costs were labor and environmental. 

Eighty-eight percent of manufacturers labeled these regulations a challenge for business. Notably, when the National Association of Manufacturers surveyed its members to see what they would do with the funds that are currently being used to comply with regulations, 63 percent responded that they would put the additional dollars toward investment. Another 22 percent said they would use the funds for employee initiatives.

Source: W. Mark Crain and Nicole V. Crain, "The Cost of Federal Regulation to the U.S. Economy, Manufacturing and Small Business," National Association of Manufacturers, September 10, 2014. 


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