Perspectives: The Cost of Non-Environmental Compliance

Sometimes it seems that federal agencies are only around to make and enforce laws and regulations.

Sometimes it seems that federal agencies are only around to make and enforce laws and regulations. Or even that they make laws only so that they have something to do…enforce them. Whether or not this observation has any grain of truth, manufacturers spend an inordinate amount of time and money to comply with workplace regulations. And we aren't even talking environmental regulations.

According to a study by the Mercatus Center at George Mason University conducted in conjunction with the National Association of Manufacturers, U.S. companies paid $28 billion to comply with federal workplace regulations in 2000. That is an average of $2.2 million to comply with workplace regulations. That breaks down to $1,700 per employee.

The study also found that the burden of these regulations falls disproportionately on small firms that employ fewer than 100 people. Their total compliance costs breaks down to about $2,500 per worker. This is 68% higher than the cost at larger firms with more than 500 employees. They pay about $1,500 per employee.

These regulations include worker health and safety benefits that accounted for one-third of the costs and employee benefits that accounted for one-fourth of the costs. For companies with less than 100 employees, this averages out to 2.4% cost as a percent of receipts.

The most costly worker health and safety compliance regulations for manufacturers are OSHA, followed by workers' compensation and the Drug Free Workplace Act. Companies paid $567 for each employee to comply with safety and health regulations and $468 to comply with benefit regulations.

"What our study found was that the cost for manufacturers to comply with workplace regulation exceeds by at least 75 % the cost estimates in previous academic and government studies," said Mark Crain, economics professor at George Washington University.

The other point this study makes is that the burden of federal workplace regulations seems to fall on companies that employ less than 100 people, which are many in the finishing industry.