NCPA - National Center for Policy Analysis

Mercatus Center Study: Cost of Workplace Regulations

July 25, 2002

Regulations are used for a variety of purposes from ensuring minimum safety standards to preventing racial discrimination. However, they do not come cheap. A study by the Regulatory Studies Program at George Mason University's Mercatus Center finds that they have a significant cost.

The researchers performed a survey of 100 manufacturers in the United States with firms ranging from 7 employees to 65,400 employees and annual receipts ranging from $600,000 to $15 billion. They found that among the firms surveyed:

  • Complying with workplace regulations costs 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 employees), with costs of $2,573 per employee and $1,530 per employee respectively.
  • Mid-size firms (100 to 499 employees) faced the cheapest regulatory cost at $1,361 per employee.

The survey also discovered which types of regulations affect manufacturers most:

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

According to the study, if these amounts are extrapolated to all manufacturing firms in the United States, the total cost of complying with workplace regulations would be approximately $32 billion. It concludes that the cost of complying with workplace regulation equaled 1.6 percent of gross receipts in the typical manufacturer.

Source: Joseph M. Johnson, "A Review and Synthesis of the Cost of Workplace Regulations," Working Paper, August 30, 2001, Regulatory Studies Program, Mercatus Center, George Mason University.


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