The United States needs progress on climate change, Dow (IW 500/22) CEO Andrew Liveris told a manufacturing conference recently, but he wasn't talking about reducing greenhouse gases. He was describing the business climate in the U.S. and the problem of "complex and expensive regulations stifling America."
"Dow has over 60 agencies monitoring it," he said. "I'm sure I could do with 50, or 30."
Manufacturing leaders such as Liveris are quick to point out that they are not against all regulations, but they argue that companies are increasingly confronted by a complex array of regulations that impose ever higher costs on U.S. producers. At a time when the nation needs to strengthen its competitiveness, they warn, regulations instead result in unintended consequences such as lower productivity, less employment, fewer exports and less innovation.
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"No single regulation or regulatory activity is going to deter innovation by itself, just like no single pebble is going to affect a stream. But if you throw in enough small pebbles, you can dam up the stream," says Michael Mandel, an economist with the Progressive Policy Institute. "Similarly, add enough rules, regulations and requirements, and suddenly innovation begins to look a lot less attractive."
"I can attest that poorly designed regulations and duplicative or unnecessary paperwork requirements create real costs that affect manufacturers' bottom lines," Drew Greenblatt, the president and owner of Marlin Steel Wire Products, testified before a House subcommittee on Feb. 28.
As an example, he related how the company, with 32 employees and $5 million in sales in 2012, had received a letter in 2010 from the Treasury Department imposing a $15,000 fine because Marlin Steel Wire omitted "a third signature on a 20-page form when we created a 401(k) plan for our employees." After several weeks of communication, the company eventually paid a smaller penalty, but Greenblatt said "valuable resources were diverted away from our business activities because of a missed signature on a form."
While federal regulations pose a challenge even for large companies, they can be particularly daunting for smaller firms and especially burdensome on small manufacturers. A 2010 study by the U.S. Small Business Administration's Office of Advocacy found that regulatory costs averaged $8,086 per employee for all companies. But for all manufacturers, the average cost was $14,070 per employee. For manufacturers with 20 or fewer employees, the study found the average cost was $28,316 per employee.
