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Study: Federal regulations cost small firms more than big firms

Federal regulations continue to impose a disproportionately greater cost to small businesses than large firms, confirm the results of a study released by the U.S. Small Business Administration Office of Advocacy.

The study examined the overall cost of federal regulation on small business, not to evaluate the benefits of federal regulations. The latest findings are consistent with previous studies conducted by the SBA Office of Advocacy.

“Small businesses still face higher costs when they encounter government regulations compared to larger firms,” said Winslow Sargeant, chief counsel for advocacy.

The results of the study show that on a per employee basis, it costs small businesses $2,830 more than larger firms to comply with government regulations.

Said Sargeant: “That is a 36 percent difference and that is an unfair burden to place on American small business.”

The cost of environmental regulations appear to be the main driver when determining the severity of the disproportionate impact on small firms. Compliance with environmental regulations costs 364 percent more in small firms than in large firms. The cost of tax compliance is 206 percent higher in small firms than the cost in large firms.

The study details the distribution of regulatory costs for major sectors of the economy: health care, manufacturing, services and wholesale and retail trades.

A fifth, residual category containing all enterprises not included in the other four also was considered.

The sector-specific findings revealed that the disproportionate cost burden on small firms is particularly stark for the manufacturing sector. In addition, the “other” category also indicates a high level of disproportionality between small and large firms. The compliance cost per employee for small manufacturers is more than double the compliance cost for medium-sized and large firms.

In the service sector, regulatory costs differ little between small businesses and larger firms. The distribution of the regulatory burden across firm sizes in the other major business sectors falls somewhere between these two cases.

The Business Times has served as the definitive source for Grand Junction business news since 1994. The journal offers news, views and advice you can use twice each month in print with daily updates online at www.TheBusinessTimes.com
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