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Pay Up: Federal regulations cost U.S. economy

New NAM Study Shows Small Manufacturers in Missouri and Nationwide Face More Than Three Times the Burden of the Average U.S. Business

(Washington, D.C., September 10, 2014) – Complying with federal regulations costs Americans $2.028 trillion in lost economic growth annually, or roughly equivalent to 12 percent of total GDP that could be invested back into our nation’s businesses, according to a new study commissioned by the National Association of Manufacturers (NAM).

The study, conducted by economists Nicole V. and W. Mark Crain, concluded that manufacturing businesses face a disproportionate share of the burden, or $19,564 per employee per year—nearly double what the average U.S. business pays to comply with federal rules. Small manufacturers pay more than three times as much as the average U.S. firm. That is $34,671 per employee per year that small manufacturers could use to grow their businesses and create jobs.

In Missouri, where the manufacturing sector contributes an estimated 12.5 percent to the economy and accounts for 252,200 jobs, onerous federal regulations are stifling growth and innovation.

“Manufacturers have long cited more and more complex regulations as a barrier to their growth, and today, we have new data demonstrating the true burdens shouldered by manufacturers throughout the supply chain, particularly the smallest firms, in complying with growing federal mandates,” said NAM President and CEO Jay Timmons. “Manufacturers rely on a stable, balanced and commonsense regulatory environment to create jobs and fuel economic growth. With growing regulatory compliance burdens, policymakers should be alarmed that our nation’s smallest manufacturers are being put at a competitive disadvantage within the global economy.”

The newly released NAM study builds on previous studies conducted by the Crains for the U.S. Small Business Administration’s Office of Advocacy. This study updates previous estimates of the cost to comply with federal regulations using new data sources and incorporates the findings of an extensive survey of NAM members that validate conclusions reached in the economic analysis. That survey, for instance, shows that manufacturers would invest more in their businesses and in their people if compliance costs were lessened.

“Our data continue to show that small businesses and manufacturers bear a disproportionate share of compliance costs,” said Nicole V. Crain.

“Overall, we hope that this analysis helps policymakers as they contemplate additional regulatory proposals,” added W. Mark Crain. “Small business and manufacturers most frequently identified regulatory issues as the top business challenge.”

“These costs don’t even include the more significant regulations heading our way, such as a new ozone standard from the Environmental Protection Agency that would be the most expensive regulation in U.S. history,” said Timmons. “These and other regulations mean an even larger burden on our country’s small manufacturers. Now is the time to return clear-eyed economic analysis to the policy process and ease the burden on job creators across the country.”

For more information, including the full study and the executive summary, visit www.nam.org/CostofRegulation.

-NAM-

The National Association of Manufacturers (NAM) is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12 million men and women, contributes $2.08 trillion to the U.S. economy annually, has the largest economic impact of any major sector and accounts for two-thirds of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the Manufacturers or to follow us on Shopfloor, Twitter and Facebook, please visit www.nam.org.

About Nicole V. and W. Mark Crain: The Crains are professors at Lafayette College and the authors of the 2010 study “The Impact of Regulatory Costs on Small Firms,” commissioned by the U.S. Small Business Administration’s Office of Advocacy.

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