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The research of W. Mark Crain, William E. Simon ’52 Professor of Political Economy, is featured in leading business publications and mainstream media on both sides of the Atlantic.
Crain is author of a report entitled “The Impact of Regulatory Costs on Small Firms” that was funded by the U.S. Small Business Administration and released in September by SBA’s Office of Advocacy. The peer-reviewed study estimates the total cost of federal regulations and its distribution among different sectors of the economy and among firms of different sizes. The results indicate a disproportionate regulatory compliance impact on small business. Small businesses typically face a 45 percent greater burden than their larger business counterparts.
Business Week features the report in the Dec. 5 article “A Heavy Regulatory Load.” “Small manufacturers bear a disproportionate share of the costs of federal environmental regulations,” it begins. “That’s one of the key findings from research commissioned by the Small Business Administration and conducted by economist Mark Crain of Lafayette College. Complying with federal environmental regulations costs manufacturers with fewer than 20 workers an average of $15,747 per employee, more than triple the $4,970 cost per worker for companies with 21 to 499 workers.”
Crain’s study analyzes compliance costs for economic, workplace, environmental, and tax regulations. It details regulatory costs for five major sectors of the U.S. economy: manufacturing, trade (wholesale and retail), services, health care, and other (a residual category), revealing that the disproportionate cost burden on small firms is particularly stark for the manufacturing sector. The compliance cost per employee for small manufacturers is at least double the compliance cost for medium-sized and large firms.
Business Week continues, “Regulatory costs are a huge competitive issue, says Crain, given that small companies make up about 75% of U.S. manufacturers. When creating regulations, government ‘must do more to balance costs and benefits,’ says Crain, or risk seeing manufacturers move to countries with fewer restrictions.”
Investor’s Business Daily cites the research in a Dec. 9 editorial: “Too often, government rules – whether local, state or federal – are deadly to growth. They choke even the most robust economy. . . . Mark Crain [figures] that the cost of regulation was [$1.1 trillion] last year. That’s a lot of lost jobs and missed opportunities.”
“The cost of federal regulations per household has hit $10,172, more than what the average American household spent on health care in 2004. . . . The share of regulatory costs that falls initially on businesses was $5,633 per employee in 2004 – a 4.1% rise since 2000 after adjusting for inflation, according to the study by economist W. Mark Crain published by the United States Small Business Administration,” says Great Britain’s Sunday Business in its Oct. 9 story “US Red Tape Soars To Over $1.1 Trillion.”
In a Dec. 23 editorial entitled “Ease the Red Tape,” the Kansas City Star says, “A new study for the Small Business Administration has quantified what a lot of entrepreneurs already know: The costs of complying with government red tape fall much heavier on small businesses than on giant corporations. Such findings should give pause, especially when many of the new jobs added to our economy are created by small businesses. The study, by W. Mark Crain of Lafayette College in Easton, Pa., found that complying with government rules costs smaller firms about 45 percent more per worker, or about $2,400 on average.”
A feature article, “Area Firms Agree on High Costs of Compliance,” in the Nov. 25 Toledo Blade cites Crain’s study. “Compliance costs average $7,647 per worker for firms with fewer than 20 workers, $5,411 for firms with 20 to 499 workers, and $5,282 for those with more than 500 workers, according to the study by the U.S. Small Business Administration. . . . The SBA study, done at Lafayette College in Easton, Pa., looked at costs of complying with the tax code, economic regulations governing freight shipping, environmental regulations, and workplace requirements such as those imposed by the U.S. Occupational Safety and Health Administration.”
Crain’s report updates two earlier reports from 1995 and 2001, which showed similar patterns of disproportionate regulatory burden borne by small businesses.
A former assistant to the director of the U.S. Office of Management and Budget, Crain joined the Lafayette faculty in 2004. He mentored EXCEL Scholar Stephen Bruestle ’07 (Pennington, N.J.) in research aimed at improving the accuracy of the consumer confidence index.
Crain came to College Hill from George Mason University, where he had served since 1982, most recently as director of the Center for Public Choice and professor of economics. Author of seven books, including Volatile States, published in 2004 by University of Michigan Press, he also taught at UCLA and Virginia Polytechnic Institute. He holds a Ph.D. in economics from Texas A&M University and B.S. in economics from University of Houston.
The SBA’s Office of Advocacy is an independent voice for small business within the federal government. The presidentially appointed Chief Counsel for Advocacy advances the views, concerns, interests of small business before Congress, the White House, federal agencies, federal courts, and state policy-makers.