Surprise…government regulations influence hiring decisions
Demonstrating that government rules and regulations play a significant role in small business owners’ staffing decisions, two reports show small businesses across the nation cut back on hiring this summer and have lowered their staffing plans for the future.
The National Federation of Independent Business reports that the number of small businesses who cut workers exceeds the number who added workers this summer. This means negative job creation at a time when growth is desperately needed. The reason? The top ranked problem identified by small businesses was health insurance costs, while the second and fourth ranked problems were “uncertainty about the economy” and “uncertainty about government policy” (aka government regulations). “Uncertainty has cast a cloud over the future for owners, making it difficult to make commitments to new spending and hiring,” said NFIB.
In another report, a PNC Financial Services Group survey of companies with annual revenue between $100,000 and $250 million (considered small and mid-sized businesses) reveals only 23% of companies plan to hire new employees over the next six months, down from 28% who said they planned to hire in the previous spring survey.
According to the PNC survey, 57% of business owners are pessimistic about the national economy over the next months, up from 43% who expressed worry in the spring survey. And 42% say the Affordable Care Act will result in fewer hires for the coming next year.
So what will prompt them to begin creating new jobs? More than 60% said reduced regulations would help spur their hiring plans.
Given that regulations at both the state and federal level have increased dramatically over the past three years, some form of regulatory relief is in order.
Over the last three years (2009-2011) the federal government has unleashed 10,215 new federal regulations, 106 of which are “major” regulations (an estimated annual impact of at least $100 million per year) that increase the regulatory burden on private-sector activity by more than $46 billion annually. This doesn’t include the hundreds of new regulations in the pipeline created by the Dodd-Frank financial regulation law, ObamaCare and EPA’s crusade against global warming.
In a 2008 study commissioned by the Small Business Administration, the annual price-tag for complying with regulations was $1.7 trillion—and that’s before the onslaught of new regulations since 2009. Seventy percent of the regulations were economic, accounting for $1.236 trillion of the annual cost. The other regulations were, in order of cost, environment regulations ($281 billion), tax compliance ($160 billion) and occupational safety and health and homeland security ($75 billion).
Remember, these costs are just for federal regulations, the additional layers of rules by state and local governments add even more to the tab.
WPC has long maintained that reducing the cost of doing business for small businesses, by providing regulatory relief, would encourage entrepreneurs to expand their existing businesses, and invest in new projects and businesses, putting more people to work. Small business owners are saying it too. Let’s hope policymakers in both Washingtons are listening.