On Thursday, the House Committee on Oversight and Government Reform held a hearing to discuss how regulations impact employers and job creation. Several business owners, advocates, and academics provided input on the benefits and detriments of current and proposed regulations, taking particular aim at recent proposals developed by the Occupational Safety and Health Administration (OSHA). The hearing coincided with the release of a report – Assessing Regulatory Impediments to Job Creation (pdf) – issued by the Committee. Findings of this report include the following:

• According to one study, small firms bear a regulatory cost of $10,585 per employee whereas large firms with more than 500 employees incur a cost of $7,755 per employee to comply with federal regulations.
• The manufacturing industry is hit the hardest by regulatory costs, with per firm costs at $688,944 – half a million dollars greater than the national average cost for all industries.
• Small manufacturers bear a proportionally larger regulatory burden with an estimated cost of $26,316 per employee – more than double the burden that is faced by larger manufacturers.
• While the Department of Labor has pulled back on two of its most controversial proposals, OSHA noise standards and OSHA Form 300 Musculoskeletal Disorders (MSD) reporting requirements, job creators expressed significant concern for the OSHA Combustible Dust Management rule, proposed changes in OSHA Consultation Agreements, and OSHA’s Injury & Illness Prevention Program (“I2P2”).

During the hearing, Jay Timmons, president and CEO of the National Association of Manufacturers (NAM), urged (pdf) agencies to “scrutinize the past two years of regulations and those currently under consideration to determine if they are consistent with a national mission of jobs and economic growth.” Timmons took particular issue with OSHA’s plans to propose amendments to its on-site consultation program “that would remove the ‘wall of separation’ between the consultation program and the enforcement staff.” Timmons added that: “OSHA’s actions here will only serve to discourage small businesses from participating in this successful program by making it more likely that a confidential consultation will turn into a surprise enforcement referral for something that does not present an imminent danger.”

Timmons also criticized OSHA’s anticipated proposal that would mandate a standard for employers’ safety and health programs. Timmons expressed concern that a required injury and illness program:

may not take into account the efforts by employers who already have effective safety and health programs in place or how this new mandate would disrupt safety programs that have achieved measurable successes. Based on preliminary information from OSHA, this proposal may allow OSHA investigators to substitute their judgment of the employer’s plan on how to achieve compliance and whether some “injury” in the workplace should have been addressed in some way, even if these conditions were regulated under a specific standard or did not amount to a “significant risk” as required under the OSH Act.

Echoing Timmons’ concern, witness Michael J. Fredrich, President of MCM Composites, LLC, testified (pdf) that OSHA’s proposed Injury and Illness Prevention Program “is nothing more than a ‘prove yourself innocent’ plan and it is a waste of time and money.”

Speaking on behalf of the National Federation of Independent Business (NFIB), business owner Jack Buschur testified (pdf) about the burdens imposed by project labor agreements (PLAs) and prevailing wage rules. With respect to PLAs, Buschur clamed:

The use of Project Labor Agreements is a discriminatory tactic that prevents non-union construction companies from working on government construction projects. The U.S. Department of Labor’s Bureau of Labor Statistics found in their annual report on union membership that from 2009 to 2010 union membership fell from 14.5 percent to 13.1 percent of the U.S. private construction work force. By preventing 86.9 percent of construction companies from bidding, PLAs increase the cost of construction by unfairly reducing the number of companies which can competitively bid. When you consider the fact that the construction industry currently has an unemployment rate of over 20 percent, it makes no sense to impose PLAs or other regulations that serve as impediments to job creation.

As for the prevailing wage rules, Buschur claimed that the requirements imposed by these regulations create an undue administrative burden on his business.

Karen Kerrigan, President and CEO of the Small Business & Entrepreneurship Council, testified (pdf) that the DOL’s “Plan/Prevent/Protect” regulatory initiative “will require businesses and other regulated entities to develop extensive, time-consuming plans and internal processes with their employees that will serve as a check for DOL on how and whether businesses are complying with the law.” In particular, Kerrigan took issue with the Wage and Hour Division’s planned regulation under the program that would require employers to provide workers with information on how their pay is calculated, how job classifications are developed, and whether and why they are classified as independent contractors. In addition, Kerrigan explained that under this proposal, employers would have to conduct training sessions regarding the differences in job classifications. According to Kerrigan, “for small businesses, the totality of the agency-wide Plan/Protect/Prevent program would be a significant burden – if not a nightmare.”

On the other hand, Sidney Shapiro, Member Scholar and Vice President of the Center for Progressive Reform, argued (pdf) that the focus on regulatory costs is misguide. Among other things, Shapiro claimed that:

• The cost of regulation in isolation “proves nothing because it ignores the benefits that regulation brings to the public and the economy. OMB recently estimated that over the last 10 years major federal regulations with quantified and monetized costs and benefits produced total of between $128 and $616 billion – a staggering return on the total $43-$55 billion costs of these investments.”
• Retrospective studies show that industry estimates of regulatory costs, submitted to agencies for purposes of rulemaking, are often too high.
• A recent study on regulatory costs issued by the SBA Office of Advocacy is unreliable.
• The costs of regulation generate economy activity, because the money is spent on goods and services, thereby generating jobs.

James Gattuso, a researcher with the Heritage Foundation, however, advocated (pdf) that Congress take the following steps to reduce the regulatory burden on businesses:

• Require congressional approval of major regulations that place new burdens on the private sector;
• Require a cost analysis of all legislation imposing new regulatory burdens; and
• Establish a sunset sate for new federal regulations.

Similarly, Jerry Ellig, an economist and research fellow at the Mercatus Center, made a number of recommendations in his testimony. (pdf)  Among other steps, Ellig suggested that:

Regulatory analysis needs to be encouraged, enforced, and required for all federal agencies. Agency economists should have the independence to conduct objective analysis. Agencies should publish regulatory analysis before writing proposed regulations and explain transparently how the analysis affected their decisions when they issue regulations.

A complete list of the panelists and links to their testimony can be found here.

This hearing follows other executive and legislative efforts to ensure that regulations do not pose an undue burden on the business community. Last month, President Obama issued an executive order and memoranda to federal agencies directing rulemakers to consider how regulations impact small businesses and economic development. In the same vein, the House of Representatives has begun debate on a resolution (H. Res. 72) that would require certain committees to inventory and review existing, pending, and proposed regulations and orders, “particularly with respect to their effect on jobs and economic growth.” In addition, the recently-introduced Regulatory Flexibility Improvements Act of 2011 (H.R. 527) would amend the Regulatory Flexibility Act to, among other things, require a more thorough analysis of regulations for their potential impact on small businesses. Whether and to what extent these measures are implemented remains to be seen.