Oct 26, 2010

How Much Does Government Regulation Cost You?

Abigail and Dolley readers for every product you buy, what do you think it costs you to pay for government regulation in that item?  I think the price would astound you.  Some costs may not be directly rolled into the price of the product but definitely reduce the amount of net income that goes back to a companies bottom line.  Let me give you a couple of examples that I have noted recently.

I am working on a plan to move one of my branches to a new location.  I found out today that I have to install an entirely new bathroom in the facility to comply with new county code related to the Americans with Disabilities Act.  Now, there are a handicap stalls in the existing facilities, but they don't conform to the new regulations.  This new bathroom will eliminate the janitor's closet and will add an additional $15,000 onto the construction costs for the build out.  I lost about 2 hours of my day today reworking the plan and we will get absolutely no value out of this expense.  I have been in my industry for 20 years now and have never once worked with anyone in a wheelchair, nor do I believe I have ever even had a visitor in one.  What is wrong with the existing facilities?  They are 3" too small.  Will we roll this into the cost of our product, no, it just increases my overhead.

The next one relates to transportation costs and I would like to specifically point out the air freight market.  International or Domestic, Import or Export - it does not matter, if you are flying something to meet a critical deadline you are paying out the nose for security fees.  Right after 9/11 the airlines started charging a War Risk Surcharge - $0.15/kg on every shipment and this past August due to 100% screening requirements we added another $0.15/kg for screening fees.  Right off the top we have 0.30/kg for every shipment, then there are all the documents and paperwork needed to comply with security regulations and you add another $50/shipment.  This might seem nominal at first glance but it adds up.  Theoretically if you figure 2 million kgs of airfreight moving everyday the cost of security regulatory compliance is roughly about $220 Million dollars a year.  That is added directly on to the price you pay for everything you buy. (My estimates)

There is nothing of intrinsic value that is added in either of the above instances, they are merely costs associated with complying with an ever increasing Nanny State that seeks to regulate business out of existence.