Labor and Employment

Washington, D.C. – The National Association of Manufacturers, joined by more than 1,300 associations and businesses representing manufacturers of all sizes, today called on Congress to act quickly in advancing bicameral legislation that would ensure the tax code once again supports the ability of businesses to create jobs in the U.S. and compete in the global economy. In a letter sent to Congress, the coalition writes:

“We, the undersigned businesses and trade associations, collectively employ millions of Americans in all sectors of the U.S. economy. As tax policy plays a critical role in the ability of businesses to thrive, create jobs in the U.S. and effectively compete in today’s global economy, we write to urge Congress to take immediate action to seamlessly extend three tax policies vital to workers and America’s future: immediate R&D expensing, a pro-growth interest deductibility standard and full expensing.

“Although legislation has been introduced in both chambers in support of these policies, Congress must act immediately to extend these competitive tax policies. Failing to do so will put hundreds of thousands of family-supporting jobs, cutting-edge innovation and pro-growth investments in America at risk.”

The groups writes that Congress can secure the U.S. as a global leader in innovation, incentivize job-creating investments and reinforce America’s competitiveness on the world stage by:

Ensuring the tax code supports innovation: The private sector accounts for more than 75% of total research and development spending, with small businesses alone accounting for approximately $90 billion of all private-sector R&D investments. With wages and salaries comprising approximately 75% of R&D spending, the R&D amortization requirement is first and foremost a jobs issue, with R&D jobs paying an average wage of more than $155,000. Moreover, for every $1 billion in R&D spending, 17,000 jobs are supported.

Enabling businesses to finance growth: Prior to Jan. 1, 2022, businesses’ interest expense deductions were limited by section 163(j) to 30% of their earnings before interest, tax, depreciation and amortization. Interest deductions are now limited to 30% of earnings before interest and tax. By excluding depreciation and amortization, the stricter EBIT standard acts as a tax on investment, making it more expensive for capital-intensive companies throughout the supply chain to finance job-creating growth.

Making permanent a key incentive for capital equipment purchases: A 100% deduction for the purchase of equipment and machinery in the tax year purchased was in place from 2017 through 2022. Congress enacted full expensing to spur investments and ensure that the U.S. is well-positioned to attract capital in a competitive global marketplace. However, full expensing began to phase out at the beginning of 2023 and will be eliminated completely by 2027.

Click here to view the letter and the full list of signers.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.91 trillion to the U.S. economy annually and accounts for 55% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

The NAM secured a critical win Monday when the Securities and Exchange Commission issued an order reversing course on a novel rule interpretation that would have forced private companies to disclose proprietary financial information publicly, Law 360 (subscription) reports.

What’s going on: In 2021, the SEC adopted a novel reinterpretation of SEC Rule 15c2-11, imposing the rule’s public disclosure requirements on private companies that raise capital via corporate bond issuances under SEC Rule 144A—without giving manufacturers the opportunity to provide comment on the damaging impacts of such a consequential change.

• The NAM and the Kentucky Association of Manufacturers pursued multipronged litigation and advocacy efforts arguing to the Commission and to the courts that the SEC’s actions were both procedurally improper and substantively indefensible.
• Rule 15c2-11 requires public disclosures for the protection of everyday investors in publicly traded companies that issue so-called “penny stocks.”
• But in 2020, the SEC expanded the rule to apply to privately held companies issuing corporate bonds to large institutional investors under Rule 144A.
• For decades prior, Rule 144A permitted trades in private companies’ fixed-incomes securities without public disclosure of the issuers’ financial information. Indeed, the SEC’s entire purpose for adopting Rule 144A was to allow companies to access the debt markets without public disclosure of their financial and business-strategy information.

NAM in the news: The SEC took the rare step of reversing its position on Monday, declaring that “it is appropriate in the public interest and consistent with the protection of investors” to exempt Rule 144A fixed-income securities from the requirements of Rule 15c2-11.

• “The order comes after industry groups petitioned the agency to provide relief to certain corporate debt issuers. The National Association of Manufacturers and the Kentucky Association of Manufacturers, which sought such relief in November 2022, also sued the agency in September, arguing that the SEC’s policy was enacted without public input and could harm job-creation efforts, given how many private companies rely on 144A bonds,” Law360 reports.
• Bloomberg Tax (subscription) also covered the news.

Why it’s important: Expansion of Rule 15c2-11 would have meant higher borrowing costs and less liquidity in the market—and resulted in more than 100,000 job losses a year, according to recent EY analysis prepared on behalf of the NAM.

Our take: The SEC’s action not only restores private companies’ ability to access the debt markets, but also exemplifies why the NAM litigates—as a last line of defense, to force an agency’s hand.

• “This order from the SEC is a landmark victory for manufacturers and a powerful affirmation of the NAM Legal Center’s ability to rein in regulatory overreach,” NAM Chief Legal Officer Linda Kelly said Tuesday. “We are thrilled that the Commission has reversed course on this unlawful attempt to impose a novel, onerous and wholly unjustified regulatory mandate on private companies.”
• Added KAM President and CEO Frank Jemley: “We applaud the SEC’s decision to withdraw its ill-conceived proposal. American business and free enterprise are best served when government respects the boundaries of its authority, which the SEC clearly did not do in this matter.”

Washington, D.C. – Following the announcement of the Securities and Exchange Commission’s decision to exempt Rule 144A debt—a type of corporate bond often issued by private companies—from its public disclosure requirements, the National Association of Manufacturers Chief Legal Officer Linda Kelly released the following statement:

“This order from the SEC is a landmark victory for manufacturers and a powerful affirmation of the NAM Legal Center’s ability to rein in regulatory overreach. Our multipronged advocacy and litigation efforts, alongside the Kentucky Association of Manufacturers, forced the SEC to grapple with its complete lack of justification for applying potentially harmful public disclosure requirements on Rule 144A issuers, which would have required private businesses to disclose proprietary financial information publicly. We are thrilled that the Commission has reversed course on this unlawful attempt to impose a novel, onerous and wholly-unjustified regulatory mandate on private companies.”

“We applaud the SEC’s decision to withdraw its ill-conceived proposal and appreciate the partnership with the outstanding team at the NAM to oppose it aggressively,” said Frank Jemley, President and CEO of the Kentucky Association of Manufacturers. “American business and free enterprise are best served when government respects the boundaries of its authority, which the SEC clearly did not do in this matter.”

Background:

The SEC adopted a novel reinterpretation of SEC Rule 15c2-11, imposing the rule’s public disclosure requirements on private companies that raise capital via corporate bond issuances under SEC Rule 144A—without giving manufacturers the opportunity to provide comment on the damaging impacts of such a consequential change.

According to a recent EY economic analysis commissioned by the NAM, the SEC’s expansion of Rule 15c2-11 would have resulted in decreased liquidity and increased borrowing costs in the manufacturing industry and throughout the economy—leading to job losses exceeding 100,000 annually.

The NAM and the KAM filed petitions for rulemaking, calling on the SEC to reverse course by clarifying—either by rule or by exemptive order—that Rule 144A issuers are not required to make public financial disclosures. After the agency temporarily delayed enforcement of its novel interpretation but failed to provide complete relief, the NAM and the KAM went to court—filing a lawsuit in federal district court challenging the Commission’s actions under the Administrative Procedure Act, along with parallel actions in the 6th Circuit seeking review of the agency’s failure to grant complete relief.

-NAM- 

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs 13 million men and women, contributes $2.91 trillion to the U.S. economy annually and accounts for 54% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Washington, D.C. – The federal regulatory burden is now costing small manufacturers $50,000 per employee per year, according to the topline findings of a forthcoming National Association of Manufacturers study on the macroeconomic impact of the onslaught of federal regulations. The total cost of federal regulations, estimated at more than $3 trillion dollars, outpaced the economic output of the entire manufacturing sector.

“The unbalanced federal regulations make it challenging to grow manufacturing in America by siphoning resources away from job creation and our communities,” said NAM President and CEO Jay Timmons. “The burden continues to grow year after year, undermining the bipartisan achievements from President Biden and Congress that have prioritized manufacturing—including the Bipartisan Infrastructure Law and the CHIPS and Science Act. It is chilling investment, curtailing our ability to hire new workers and suppressing wage growth, especially for small and medium-sized manufacturers. It is time for the Biden administration to take action to reverse course.”

Additional Key Facts: 

• The total cost of federal regulations in 2022 is an estimated $3.079 trillion (in 2023 dollars), an amount equal to 12% of U.S. GDP and larger than the manufacturing sector’s entire economic output ($2.91 trillion). The total annual cost of complying with federal regulations has risen by $465 billion since 2012, after adjusting for inflation.
• The annual cost burden for an average U.S. firm is $277,000, the equivalent of 19% of the average firm’s payroll expenses. A small manufacturer pays a burden of $50,100 per employee, meaning that a small firm with 20 employees bears around $1 million in annual compliance costs.
• For the manufacturing sector, the cost of federal regulations is roughly $350 billion, which equals to 12% of the sector’s value added to GDP. This is 26% higher than the inflation-adjusted cost of $277 billion borne by manufacturers in 2012.
• Surveyed manufacturers indicate that they could enhance their competitiveness if the costs of federal regulations were reduced; they would reallocate current compliance funds toward employee compensation and hiring, investment, research and development, sales and marketing, enhancing price competitiveness and improving return on investment.
• The regulatory burden on the manufacturing sector is larger than the economies of 29 American states.

To view the executive summary of the forthcoming study, click here.

Background:

The NAM and members of the Manufacturers for Sensible Regulations coalition have been leading voices on the negative impact of unbalanced regulations on manufacturers. According to the NAM’s Q2 2023 Manufacturers’ Outlook Survey, more than 63% of manufacturers report spending more than 2,000 hours per year complying with federal regulations, while more than 17% of manufacturers report spending more than 10,000 hours annually.

The NAM’s Q3 2023 Manufacturers’ Outlook Survey found that 69.1% of small manufacturers, and 63.2% of all respondents, would hire more workers or increase compensation if the regulatory burden decreased. Additionally, more than 70% of manufacturers would purchase more capital equipment if the regulatory burden on manufacturers decreased, with 48.6% increasing compensation, 48.6% hiring more workers, 42.5% expanding their U.S. facilities and 38.4% investing in research.

About the Study:

The NAM commissioned this analysis by economists Nicole V. Crain* and W. Mark Crain, who continued a three-decade effort to analyze the total cost of federal regulations, and how the burden is distributed across sectors and firm sizes. Two approaches are employed. The first is a survey of NAM members, conducted from July 20 to Sept. 1, 2023, to collect information about operational expenses dedicated to regulatory compliance, extrapolating these findings to the sector. The second approach derives estimates based on an aggregation of federal agency cost estimates, combined with regression analysis that measures the impact on overall economic output. The cost allocations by sector and firm size rely on data from the Bureau of Economic Analysis, the Bureau of Labor Statistics, the Census Bureau and the Internal Revenue Service.

*The views expressed in this study are those of the authors and do not reflect the official policy or position of the National Defense University, the Department of Defense or the U.S. government.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.91 trillion to the U.S. economy annually and accounts for 55% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Large companies that do business in California will soon be required to report their greenhouse gas emissions to state regulators thanks to a new state law, according to USA Today.

What’s going on: “Signed by Gov. Gavin Newsom on Oct. 7, SB 253 requires the California Air Resources Board to form transparency rules for companies with yearly revenues exceeding a billion dollars by 2025. The first of its kind law in the U.S. will
impact over 5,000 corporations both public and private … ”

• Under the law, by 2026 major companies will need to report the amount of carbon produced by their operations and electricity.
• By 2027 they will need to disclose “Scope 3” emissions, or those attributable to their customers and suppliers.

Why it’s important: The effects of the law on manufacturing will be ruinous and widespread, according to Conference of State Manufacturers Associations Chair and Utah Manufacturers Association President and CEO Todd Bingham.

• “Manufacturers are committed to commonsense regulations that protect consumers and the environment,” Bingham said. “California’s new law is unworkable and makes it more difficult for manufacturers to grow, invest and hire—not just in the state, but across the country.”
• COSMA members serve as the NAM’s official state partners in driving manufacturing-friendly policies at the state level.

Costly and inaccurate: “[M]anufacturers will spend millions of dollars to fulfill [SB 253]’s requirements,” Lance Hastings, president of the California Manufacturers & Technology Association (an NAM state partner), said in a September statement. “The uncertainty and reliability of this data and the process required to comply with the legislation will not produce complete, accurate or comparable disclosures.”

• Last month, the CMTA submitted a request for veto of the California law to Gov. Newsom.

The SEC: The California measure follows the September finalization of a similar rule from the Securities and Exchange Commission that “require[es] publicly traded companies to disclose their emissions and climate-related risks to investors.”

• The rule—which the NAM has been actively working against—not only requires numerous unfeasible moves, but also imposes significant financial burdens on manufacturers, the NAM has said.

What should be done: “We hope California’s devastating policy is reversed and are grateful for the NAM’s coordinating efforts against regulatory overreach at the national level,” Bingham continued.
 

The still-robust U.S. economy and tight labor market could mean further interest rate hikes, Federal Reserve Chair Jerome Powell said Thursday, Reuters (subscription) reports.

What’s going on: “We are attentive to recent data showing the resilience of economic growth and demand for labor,” Powell said during a talk at the Economic Club in New York. “Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy.”

• The Fed’s aim in raising rates has been to reduce inflation to 2%.
• Since it began raising rates in March 2022, however, unemployment has stayed largely steady, and “economic growth has generally remained above the 1.8% annual growth rate Fed officials see as the economy’s underlying potential.”

A delicate balance: While Powell said there is evidence of a cooling labor market, the Fed must account for new “uncertainties and risks”—including the Hamas–Israel war—as it seeks “to balance the threat allowing inflation to rekindle against the threat of leaning on the economy more than is necessary.”

• Data since the central bank’s last meeting, in September, have shown unexpected U.S. job growth and surprisingly strong retail sales, “offering inconsistent signals about whether inflation is on track to return to the Fed’s 2% target in a timely manner.”

Hike likely: Most Reuters-polled economists expect the Fed to raise interest rates at its next meeting on Oct. 31–Nov. 1.  
 

The economic impact of allowing a stricter interest deductibility limitation to remain in effect could be devastating, according to a new EY analysis prepared on behalf of the NAM.

What’s going on: Failure to reverse the stricter limitation that went into effect in 2022 could result in the following losses in the U.S., according to the study:

• 867,000 jobs
• $58 billion in employee compensation
• $108 billion in gross domestic product

More costly every year: Those figures have roughly doubled since the 2022 EY analysis released last year.

• Last year, EY estimated that leaving the stricter limitation in place would result in 467,000 lost jobs, $23.4 billion in lost employee pay and $43.8 billion in lost GDP.

The background: Prior to 2022, companies could deduct interest of up to 30% of their earnings before interest, tax, depreciation and amortization (EBITDA).

• However, since 2022, the deduction has been limited to 30% of earnings before interest and tax (EBIT), a significant change that disproportionately affects manufacturers, given their capital-intensive investments.

What can be done: “A stricter interest expense limitation restricts manufacturers’ ability to invest in new equipment and create jobs,” said NAM Managing Vice President of Policy Chris Netram.

• “Even more, the study finds that manufacturers and related industries bear 77% of the burden of this policy. Congress must act by year’s end to restore a pro-growth interest deductibility standard and allow manufacturers to continue to invest for the future.”

NAM in the news: POLITICO Pro’s Morning Tax newsletter (subscription) covered the study’s release.

Further reading: Visit the NAM’s interest deductibility page to learn more about this issue and how the NAM is taking action.

Washington, D.C. – The National Association of Manufacturers released a new analysis on the impact to the U.S. economy of Congress’ failure to reverse the stricter interest expense limitation that took effect in January 2022.

The jobs impact of the stricter limitation has nearly doubled over the past year given congressional inaction to ensure a pro-growth interest deductibility standard as interest rates have continued to rise. The data show that limiting manufacturers’ ability to deduct interest on debt-financed investments, over the long run, could cost the U.S. economy up to:

• 867,000 jobs;
• $58 billion of employee compensation; and
• $108 billion in GDP.

“A stricter interest expense limitation restricts manufacturers’ ability to invest in new equipment and create jobs. This analysis clearly shows that failing to reverse this damaging change will cut close to 900,000 jobs and billions of dollars of employee pay and harm economic growth. Even more, the study finds that manufacturers and related industries bear 77% of the burden of this policy,” said NAM Managing Vice President of Policy Chris Netram. “Congress must act by year’s end to restore a pro-growth interest deductibility standard and allow manufacturers to continue to invest for the future.”

Background:

Prior to 2022, the interest expense limitation was calculated based on a company’s earnings before interest, tax, depreciation and amortization (EBITDA). Last year, a stricter limitation based on a company’s earnings before interest and tax (EBIT) took effect. By excluding depreciation and amortization from the calculation, the stricter limitation increases the tax burden on manufacturers that make investments in long-lived capital equipment.

To view the full analysis click here.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.91 trillion to the U.S. economy annually and accounts for 55% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Companies’ health care costs are rising steeply, leading finance chiefs to look for alternative ways of attracting and retaining employees, according to The Wall Street Journal (subscription). 

What’s going on: “Health-insurance costs, which are among the largest expenses for many U.S. companies, are projected to rise around 6.5% for 2024, according to consulting firm Mercer.”

• “The surge … may add significantly to costs for employer plans that Mercer said already average more than $14,000 a year per employee. Many companies are expected to take on most of the increases … ”

​​​​​​​ Why it’s happening: In addition to inflation and higher interest rates, rising health care price tags are the result of a combination of higher labor costs in hospitals and elsewhere in the health care system, a rise in elective care (which declined during the global pandemic) and a demand for new drugs.

The response: Finance officers are largely seeking ways to manage the growing costs without “add[ing] pressure to employees’ budgets as health care costs rise,” according to the Journal.

• Whether that will be possible in the longer term will depend mainly on the state of the labor market and how high prices rise.
• Some companies are considering sharing the increased cost burden with employees, while others are pushing preventive care as a way to save money down the road. 

The last word: “Manufacturers feel a deep commitment to providing high-quality health care to their employees despite the increased costs of doing so,” said NAM Director of Domestic Policy Julia Bogue.

• “The NAM recently released ‘Manufacturers on the Front Lines of Communities: A Deep Commitment to Health Care,’ which details industry-wide health benefits and trends, as well as federal policy proposals that could jeopardize manufacturers’ ability to continue offering health care plans.”

Industrial production and retail sales both rose in September and exceeded growth expectations, according to MarketWatch and CNBC.

What’s going on: Industrial production increased 0.3% for the month, above the 0.1% gain expected, MarketWatch reports.

• Meanwhile, retail sales rose 0.7% for the month, more than twice the 0.3% rise estimated by Dow Jones, according to CNBC.

The details: In industrial production, “[m]anufacturing rose 0.4% and motor vehicle production rose 0.3%, held down by the ongoing strike against three automakers,” MarketWatch reports.

• For retail, “the biggest increase [was] at miscellaneous store retailers, which saw an increase of 3%. Online sales rose 1.1% while motor vehicle parts and dealers saw a 1% increase and food services and drinking places grew by 0.9%, good for a yearly increase of 9.2%, which led all categories,” according to CNBC.

What it means: The retail numbers “indicate that consumers more than kept up with price increases,” CNBC said, though that could change as employment growth is expected to slow.