Does Regulation = Unemployment?

, Spencer Irvine, 2 Comments

Contrary to what public administration profs tell you, everybody pays the cost of regulation and the unemployed may pay most heavily in lost jobs in exchange for rather murky benefits.

The National Association of Manufacturers (NAM) released a report, “The Cost of Federal Regulation to the U.S. Economy, Manufacturing and Small Business,” slamming the Obama administration for burdensome regulations imposed by the Environment Protection Agency (EPA) and other federal regulatory agencies

In his foreword, NAM President and CEO Jay Timmons said that the average American company pays $9,991 per employee to comply with federal rules and regulations and the average manufacturer pays almost double that amount – “$19,564 per employee per year.” He noted how small manufacturers, or companies with less than 50 employees, have regulatory costs of $34,671, or more than three times the cost of an average U.S. company.

Timmons added, “The United States needs government policies more attuned to the realities of global competition” because it is the “backbone of our nation’s economy and employs more than 12 million men and women who make things in America.” Thus, the regulatory costs per employee can translate into actual unemployment as factories struggle to make payroll despite the regulatory expense.

A survey portion indicated that if manufacturers had the opportunity to use the compliance costs for other things, instead of paying it to the federal government, 63% said they would invest that money and 22% would put it into employee initiatives.

The EPA will enact a new ozone-protection regulation in December 2014, which the NAM study said could be the “costliest rule in U.S. history.” The rule will lower the current standard of 75 parts per billion to as low as 60 parts per billion, even when other studies show that the ozone levels in the U.S. have “decreased by 25 percent in the past 30 years.” The new EPA rules will be “forcing shutdown, scrappage and modification of power plants, factories and vehicles” and “this pain would be felt from coast to coast.” The study noted that the threshold of 60 parts per billion is so low, “even our national parks – from Yellowstone to Denali” would not be in compliance with this EPA rule.

This new ozone standard from the EPA could possibly “reduce GDP by $270 billion per year,” cost up to “$2.2 trillion” in compliance and “drastically increasing energy costs and placing millions of jobs at risk.” The study said, “At this price…it would be the most expensive regulation the U.S. government has ever issued.” It could cost the average American home $1,570 in lost consumption, lead to 2.9 million fewer jobs from 2014 until 2040, and raise natural gas costs by 52% and electricity costs by 23% on average. States such as Illinois, Ohio, Pennsylvania and North Carolina will feel the impact of the new EPA rules, and two-thirds of the rules and regulations have not been identified by the EPA at this point in time.

The report found that the total cost of federal regulations in 2012, in terms of 2014 dollars, was over $2 trillion. Out of that total, $330 million was due to environmental rules, $1.4 trillion for economic rules, $159 billion in tax compliance laws and lastly, $92 billion for occupational safety and hazard and homeland security regulations. Also, the study found that manufacturers spend $138.6 billion per year on compliance costs.