Study estimates small manufacturers’ regulatory costs exceed $50,000 per employee

The federal regulatory burden is now costing small manufacturers $50,100 per employee per year, according to the topline findings of a forthcoming National Association of Manufacturers study on the macroeconomic impact of the onslaught of federal regulations. The total cost of federal regulations, estimated at more than $3 trillion dollars, outpaced the economic output of the entire manufacturing sector ($2.91 trillion).

For the manufacturing sector, the cost of federal regulations is roughly $350 billion, which equals to 12% of the sector’s value added to GDP. This is 26% higher than the inflation-adjusted cost of $277 billion borne by manufacturers in 2012.

“The unbalanced federal regulations make it challenging to grow manufacturing in America by siphoning resources away from job creation and our communities,” said NAM President/CEO Jay Timmons. “The burden continues to grow year after year, undermining the bipartisan achievements from President Biden and Congress that have prioritized manufacturing—including the Bipartisan Infrastructure Law and the CHIPS and Science Act. It is chilling investment, curtailing our ability to hire new workers and suppressing wage growth, especially for small and medium-sized manufacturers. It is time for the Biden administration to take action to reverse course.”

Surveyed manufacturers indicated that they could enhance their competitiveness if the costs of federal regulations were reduced; they would reallocate current compliance funds toward employee compensation and hiring, investment, research and development, sales, and marketing, enhancing price competitiveness and improving return on investment.

The study included a survey of NAM members, conducted from July 20 to Sept. 1, 2023, to collect information about operational expenses dedicated to regulatory compliance, extrapolating these findings to the sector. In addition, estimates were derived based on an aggregation of federal agency cost estimates, combined with regression analysis that measures the impact on overall economic output. The cost allocations by sector and firm size rely on data from the Bureau of Economic Analysis, the Bureau of Labor Statistics, the Census Bureau, and the Internal Revenue Service.