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Impact of Government Regulations on US Manufacturing

When it comes to manufacturing, materials are of course the highest cost, and for good reason. You can’t really manufacture anything without the materials to do so. You also need the workers to do the manufacturing, which makes labor the second highest cost.

And these are the two costs that we often put the most focus on: labor and materials. If you’re looking to save money, you ask “how can we cut back on labor” or “where can we acquire cheaper materials”.

But there’s another expense in US manufacturing that continues to rise:

Government regulations.

The Cost of Good Intentions

Government regulations are often well meaning. Many of them are put in place for safety and environmental friendliness, while also making sure businesses don’t take advantage of their employees.

This, however, comes at a great cost. Federal regulations cost the US economy $2 trillion a year. Of that, $420 billion goes to environment and safety. Where does the rest go? It’s not always so clear.

Manufacturing industries tend to be the most regulated in the economy. A small manufacturing company may pay as much as $35,000 a year per employee in regulation compliance.

Suppressing Growth

The high cost of federal regulations has a ripple effect across the economy. Job opportunities are limited as companies can’t afford to hire more works. For those who do have jobs, their pay is limited because of fee their employers have to pay to the government.

As for those buying manufactured goods such as wire rings, costs are driven up because of regulation costs.

In an effort to combat the costs, many companies of course move their manufacturing overseas, which cuts jobs and hurts the US economy.

Simply put, everyone ends up paying the price for these regulations.

Is it Time for a Change?

While the burden of regulation cost is brought up from time to time on the political floor, it’s quickly passed over for other topics. No real proposals have been brought forward regarding a plan to change the current system.

It’s becoming more clear that a change needs to happen. The question is, will it be too late?

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