Wednesday, December 22, 2010

One More Time: It's the Cost of Compliance

Over the last several years, I've (fruitlessly) mentioned that jobs are going overseas for LOTS of reasons, only one of which is labor-cost. And in a lot of cases, that 'labor cost' is not wages and bennies--rather, it's regulatory burden which contributes to 'labor cost.'

Here's another look at the same discussion.

We can break manufacturing costs into two broad categories. The first covers those costs directly related to producing the product and operating the business. In the most comprehensive sense this would include not only the labor, materials, and facilities needed to make the physical product, but also the managerial, sales, administrative, and distribution costs necessary to operate in a given market. The second category, the one we are focusing on here, are non-product related costs. Simply put, they are those that if removed in total, would have no discernible immediate impact on the product itself or market position of the producing company. Let’s call these two categories product and non-product related costs.

The essay goes on to list the explosion in 'non-product-related' costs, starting with fleets of HR types, health insurance mandates, EPA mandates, legal beagles, and (let's not forget them) tax CPAs and attorneys.

Businesses must spend vast sums in an attempt to be compliant and to minimize the potential devastation that comes from even minor non-compliance. These non-productive costs were small nuisance items at the outset but have since grown to be major components of business costs. They have contributed to U.S. companies finding it harder and harder, in some cases impossible, to compete domestically against global producers of basic manufactured products.

Another item for Governor Walker's "to-do" list.


Anonymous said...

Yep, let's go back to the "Robber Baron" days of the late 1800's.

Slippery slope, Dad29, slippery slope.

TerryN said...

Where ya gonna find the Robber Barons? They're all dead...

Dad29 said...

Terry, our widdle Anony is challenged by thinking.

IOW, it's a troll. Don't bother.

neomom said...

Yeah - Robber Barrons... sure.

We are desperately trying to keep one of our manufacturing facilities afloat. Guys make about $25/hour.. decent wage. Their burdened rate? $118/hour.

Those regulatory costs are real.

ReasonableCitizen said...

Exactly how will Governor-elect Walker have any influence over federal regulations? Will he raise his voice or exempt Wisconsin businesses from dumping pollutants into rivers, from dumping carcinogens into the air, or from having catalytic converters?
Perhaps he could allow Wisconsin drug mfrs to make federally unapproved drugs for distribution into the Wisconsin healthcare system?

I would like to know more about his powers to help Wisconsin exempt themselves from federal control.

Dad29 said...

On this planet, there are State regulations, too.

ReasonableCitizen said...

And do you have examples of egregious (or onerous) state regs other than the DNR?

Banning smoking in the work place is egregious. Same for bars and restaurants but I don't think the cost of banning smoking concerns most people and likely would not be a burden to business-unless they make cigars or cigarettes.

Dad29 said...

Ever hear of Dep't of Workforce Development? Ever look at their "administrative law" regarding workplaces? Or the special lovey-dovey Union-friendly work-related injury clauses?

Maybe the Department of Licensing and Regulation strikes a bell with you? Nice to know, isn't it, that all barbers are 'regulated' and 'licensed.' Por que?

Noticed the Fed (AND State, and City of Milwaukee) PLA requirements?

How about Wisconsin's imperatives on health insurance?

For someone who calls themselves a 'citizen,' you don't really have too good a grasp on major cost issues, do you?

neomom said...

Add in all of the crappola they are adding to the Public Service Commission to lower carbon emissions...