Small Manufacturers, Big Burden: The Disproportionate Impact of U.S. Regulations
U.S. manufacturers are no strangers to the rising costs of regulatory compliance. With a complex web of federal, state, and local regulations, the cost of doing business continues to grow as manufacturers navigate economic, environmental, safety, and labor-related rules.
According to a study by the National Association of Manufacturers, regulatory expenses in 2022 reached a staggering $3.1 trillion across the U.S. economy, or roughly 12% of GDP. This burden falls especially hard on manufacturers, with small firms incurring regulatory costs more than three times higher than the average U.S. company.
Economic Regulations: A Heavy Financial Toll
Economic regulations touch nearly every part of a manufacturer’s operations, from market transactions and pricing to production and trade. Companies must navigate licensing requirements, certifications, and strict limitations on what can be produced or sold.
On average, economic regulations cost U.S. manufacturers $10,400 per employee each year. While larger firms can absorb these expenses more easily, small manufacturers—those with fewer than 50 employees—struggle to keep up. The disproportionate cost burden hinders their ability to compete, both domestically and globally, where regulatory frameworks may be more lenient.
Environmental Regulations: A Strain on Small Firms
Environmental regulations, designed to curb emissions and ensure responsible waste management, represent some of the highest compliance costs for manufacturers. While these rules are essential for public health and sustainability, they often come with hefty price tags.
For small manufacturers, environmental compliance costs average $40,700 per employee, compared to $12,500 for larger firms. This disparity highlights a critical challenge: regulatory costs do not scale down with the size of the business. A small firm with 25 employees faces the same stringent standards as a larger company with 250 employees, leaving little room to absorb these expenses. Consequently, many small manufacturers are forced to invest heavily in pollution control technologies and process modifications, which can significantly erode their already slim margins.
Labor and Safety Compliance: Ongoing Costs
Meeting labor and safety regulations, particularly those governed by the Occupational Safety and Health Administration (OSHA), adds yet another layer of financial burden for manufacturers. Ensuring a safe workplace is essential, but compliance comes at a cost—around $1,000 per employee annually.
Smaller manufacturers, in particular, often need to rely on outside expertise to meet these regulatory demands. The study found that 62% of manufacturers hire external advisers—such as attorneys, consultants, or accountants—to navigate the complex regulatory landscape, further increasing their operational costs.
