Regulations rule the business world. Every day, manufacturers have to contend with an ever-growing list of regulations that they must follow. Failure to follow any one regulation can have severe consequences for a manufacturer, such as hefty fines or the imposition of extra operational restrictions.
Today, March 19, Marlin Steel is set to testify before the Senate Subcommittee on Regulatory Affairs and Federal Management of the Committee on Homeland Security and Governmental Affairs regarding the effects of excess regulations on American manufacturers. Through this testimony, Marlin Steel will push for reforms to the mountain of regulatory paperwork that businesses throughout the country face, regulations that may be strangling manufacturing sector growth and the recovery of the economy.
Why Regulations are a Good Thing
In any industry, smart, logical, and clearly-stated regulations are a good thing. Many laws and regulations governing business help to protect the rights of workers and keep the playing field level between businesses large and small.
For example, regulations regarding the use of proper safety equipment on the job help to prevent employees from getting injured, which benefits the employees by keeping them safe, and the employer by reducing lost-time incidents on the job and the often-expensive medical costs and search for a replacement employee.
Regulations and laws surrounding a company’s intellectual properties help make sure the IPs that a company has invested so much money into cannot be stolen by a competitor who gains extra advantage because they never had to invest a dime into research and development for the IP, which gives the thief an unfair cost advantage.
In this light, regulations are a necessary and beneficial force for American businesses that can protect the interests of employers and employees alike.
Going too far: the Trouble with Over-Regulation
While some regulation is a very good thing, over-regulation of any industry can cripple a business’ ability to operate. How bad is over-regulation of the manufacturing industry?
According to a NAM/IndustryWeek Survey of Manufacturers cited in the report to the Senate subcommittee, “69.1 percent of respondents cited an unfavorable business climate due to government policies, including regulations and taxes, as a primary challenge facing businesses—up from 62.2 percent in March 2012.” In a time of economic recovery from a major recession, these businesses are being faced with an enormous regulatory burden, slowing their growth, and thus the economy’s recovery.
Another indicator of how much strain over-regulation is placing on businesses can be found within the federal government’s own data. As cited in the report, “the paperwork burden imposed by federal agencies excluding the Department of Treasury increased from 1.509 billion hours in fiscal year (FY) 2003 to 2.446 billion hours in FY 2013, an increase of 62.1 percent.”
Yes, that’s billion with a “B.” to put that number in perspective, there are 8,766 hours in a year (adjusted for leap years), which means that 2.446 billion hours of paperwork is equal to 279,032 YEARS of paperwork. American businesses are being buried under a mountain of paperwork to rival the Himalayas, and more is being added to the pile all the time. In fact, 484 major new regulations—called so because each one impacts the economy by more than $100 million annually—have been issued in the last six years alone.
The constant flood of new regulatory measure makes keeping up difficult and expensive, and limits the ability of manufacturers to hire new talent, grow their business, and to compete with less heavily-regulated foreign competitors.
Regulations are having a Disproportionate Effect on Manufacturers
As a process, manufacturing is very dynamic and ever-changing. Manufacturers are always on the lookout for faster, safer, more efficient ways to transform raw materials into usable goods. However, certain regulations make it more difficult to increase efficiency.
Regulatory compliance costs for manufacturers are disproportionate compared to the rest of the industry, especially among small business manufacturers such as Marlin Steel. Small manufacturers with less than 50 employees aver regulatory costs of $34,671 per employee each year, triple the rate of the average U.S. business.
The average income for a manufacturing employee is roughly $77,000/year. If regulatory compliance costs for small business manufacturers could be cut in half, then they could add roughly 25% more employees to their payroll. This would increase the tax base and put more earners in the economy to buy more goods, a winning situation for the U.S. economy and government.
Solving the Problem
In the Senate Testimony, Marlin Steel calls for policy makers to perform a thorough review of the existing regulatory measures in place and eliminating those measures that are outdated or redundant. Simply eliminating repetitive measures would save the U.S. economy an incalculable amount of time and money on paperwork alone.
Streamlining the paperwork for the measures that remain would further serve to save time and prevent costly errors that waste the time of not only employers and employees, but of the various regulatory branches of the government as well.
For example, in the past, Marlin Steel was setting up a 401(k) plan for its employees. In the 20-page filing document, one signature of three was missing from the submitted document, which lead to a $15,000 fine being levied against the company for what amounted to a very minor oversight.
After weeks of back and forth between Marlin Steel and the Department of Treasury, weeks in which hours and hours of labor was spent on both sides, a settlement was reached for a lower penalty to pay for the mistake. The time spent on fixing this error cost not only Marlin Steel money in the form of lost productivity, it cost taxpayers money as well for the time of the Dept. of Treasury’s time and labor verifying the document, submitting the error forms, filing the fines, and negotiating with Marlin Steel.
By eliminating redundant regulations and simplifying the paperwork for the regulatory compliance paperwork that remains, we can improve efficiency for all American businesses, and perhaps even save some money in the government budget that’s being eaten up on managing all of these redundant rules and regulations.
Support Regulation Simplification
Join Marlin Steel in the fight to improve the U.S. economy. By writing your Senators and Representatives to encourage them to work together to reduce the over-regulation of American businesses in bipartisan measures will benefit the country as a whole. View the full testimony document here.