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SMEs drowning in regulatory paperwork; SPI calls for updating nation’s regulatory scheme
While the federal government talks a good game with regard to supporting manufacturing, training skilled workers for manufacturing jobs, and applauding the resurgence of U.S. manufacturing, the regulatory burden on manufacturers is becoming greater and impeding growth.
September 11, 2014
4 Min Read
The National Association of Manufacturers (NAM) recently issued a new report that shows the macroeconomic impact of federal regulations on manufacturers, who bear a "disproportionate share of the regulatory burden," said NAM. Small manufacturers are hurt the most by these regulations because "their compliance costs are often not affected by economies of scale." NAM's analysis finds that the average U.S. company pays $9,991 per employee per year to comply with federal regulations. The average manufacturer in the U.S. pays nearly double that amount -- $19.564 per employee per year. Small manufacturers (those with fewer than 50 employees) incur regulatory costs of $34,671 per employee per year, more than three times the cost borne by the average U.S. company.
NAM notes in its report [The Cost of Federal Regulations to the U.S. Economy, Manufacturing and Small Business] that the federal regulatory system "produces unnecessarily costs rules, duplicative mandates, impediments to innovation and barriers to our international competiveness." NAM's President and CEO, Jay Timmons, is calling for reforms to the regulatory system "so that manufacturers can innovate and make better products instead of spending hours and resources complying with inefficient, duplicative and unnecessarily burdensome regulations," if the U.S. is to succeed in creating a more competitive economy.
Some key findings in NAM's report show that the total cost of federal regulations in 2012 was $2.028 trillion (in 2014 collars). The annual cost burden for an average U.S. firm is $233,182, or 21% of average payroll. Eighty-eight percent of those surveyed say that federal regulations are a top challenge for their firm.
In response to NAM's report, the Society of the Plastics Industry (SPI) called on officials across the U.S. to reform the nation's outdated regulatory system. "As the nation's third-largest manufacturing sector employing 900,000 men and women, the plastics industry is no stranger to regulations," said SPI President & CEO William R. Carteaux. "While many of these rules and regulations are proposed and implemented with good intentions, the devil has always been in the details and as the NAM report makes clear, America's regulatory framework is in need of a serious reboot. Comprehensive reform is necessary to allow the nation's manufacturers to grow their businesses, hire more workers and keep America competitive abroad."
A report produced by the Small Business Administration Office of Advocacy, found that U.S. manufacturing comprised $162 billion of the $648 billion burden of environmental, economic, workplace and tax compliance regulations. "Dollars spent by manufacturers on regulatory compliance with cumbersome or duplicative regulations are dollars not spent on capital investment or hiring new employees in America," stated the SBA in its report. "The NAM and its members are working to advance a manufacturing regulation system that is focused on real priorities and removes unnecessary impediments to growth."
Regulatory compliance is just one more structural cost for U.S. manufacturers, which also includes corporate tax liabilities, employee benefits, tort litigation, and energy costs.
The National Federation of Independent Business (NFIB), the nation's leading small business advocacy association, this week called on Congress "to stop environmental regulators from expanding their authority over U.S. waters to include farmers' ponds, seasonal streams and even temporary bodies of water that most Americans would call puddles."
The NFIB sent a letter to Congress asking that body to pass H.R. 5078, the Waters of the United States Regulatory Overreach Protection Act of 2014. It would block the U.S. Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers from expanding the Clean Water Act far beyond its original design in ways that would drown property owners, small businesses and farmers under new regulations and costly litigation. The measure is similar to Senate bill 2496 introduced in July by Senator John Barrasso (R-WY), "which the NFIB also strongly supports."
NFIB Manager of Regulatory Policy Dan Bosch, said, "When Congress gave the EPA authority over U.S. waters it clearly didn't mean any water, anywhere. It meant those waters important for commerce. This legislation is necessary to reinforce those intentions."
SPI's Carteaux stated, "Through its ongoing advocacy, public outreach and business development activities, the SPI has worked tirelessly to give manufacturers in the $374-billion plastics industry the tools they need to keep innovating to meet the needs of today's consumer, at home and abroad. But it's hard for companies to build a more vibrant 21st-century manufacturing sector when they have to comply with 20th-century regulation."
Carteaux continued by noting that a modern regulatory regime needs to be "based on scientific, technological and economic realities, rather than outdated facts, emotion and hearsay" while ensuring the safety of workers, the environment and consumers and "fostering the innovation and job growth that manufacturing is poised to unleash. SPI looks forward to working with NAM and policymakers to make this a reality."
About the Author(s)
Until she retired in September 2021, Clare Goldsberry reported on the plastics industry for more than 30 years. In addition to the 10,000+ articles she has written, by her own estimation, she is the author of several books, including The Business of Injection Molding: How to succeed as a custom molder and Purchasing Injection Molds: A buyers guide. Goldsberry is a member of the Plastics Pioneers Association. She reflected on her long career in "Time to Say Good-Bye."
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