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.