Business Ideas Blog

While the finding may be intuitively obvious (not the government), World Bank economists have recently shown that entrepreneurs create fewer new companies in countries with regulations that make companies more difficult game.

The reduction of regulation also improves the performance of small businesses. For example, researchers found that efforts to simplify the process of forming new businesses in Mexico increased use of small businesses by nearly 3 percent.

Why the regulation is a problem

Economists believe that regulation hurts small business in four ways. First, as Nicole and Mark Crain of Lafayette College to explain, regulatory compliance has a disproportionate burden on small businesses because the fixed costs of adhering to the rules can be spread over more money in big companies than in small. Crain and Crain estimated the cost per employee to comply with federal regulations at $ 10,585 for companies with fewer than 20 employees, but only $ 7,755 for businesses with more than 499 employees.

Second, government regulations, small businesses less competitive against foreign competition. As Crain and Crain explain government regulations create "inefficiencies in the structure of U.S. firms," damaging "the international competitiveness of domestic production of U.S. goods and services". " The relocation of production facilities to less regulated countries "and that leads to

Third, the addition of rules creates uncertainty, which keeps small business owners and hiring investment. Because some business owners can predict the scope or impact of new regulations that often delay the purchase of capital equipment or adding workers as they wait to see the impact of new regulation.

Fourth regulations, new often have unintended consequences. Consider the health care law, which requires companies to file 1099 forms for all individual payments to a beneficiary in excess of $ 600 per year from 2012. The effort to increase health insurance coverage has led to an unrelated tax imposed high compliance costs for small business owners, a result that surprised even many in Congress who voted to approve the law.

The United States does not compare well with many industrialized countries in the dimension of the regulation of small business. The Organization for Economic Cooperation and Development (OECD) found that U.S. had higher regulatory barriers to entrepreneurship, greater administrative burden on small business owners and major obstacles to competition from a number of other industrialized countries.

The regulatory burden on small U.S. companies are worsening. Both the World Bank and the Global Entrepreneurship Monitor report, U.S. that entrepreneurs face more red tape to launch in 2007 than in 2003.

U.S. small businesses are being adversely affected by two massive new laws: protecting the patient and affordable health care law and Dodd-Frank Wall Street Reform and Consumer Protection. A recent survey of the free card for small business owners indicated that almost half of small business owners believe the new health law is detrimental to their businesses and just over a quarter of what I see as beneficial . Responded to a 2010 Discover Card survey revealed that 55 percent of small business owners believe the financial reform project will finance small business more difficult, while only 9 percent thought that the new law make it easier.

Our leaders talk about reducing the regulatory burden on small businesses. In a recent article in The Wall Street Journal, President Obama wrote: "Sometimes, these rules have gotten out of balance, imposing excessive burdens on businesses, the charges that have stifled innovation and have had a negative effect on growth and employment .... I am currently directing federal agencies to do more to take into account, and regulations, reduce the burden can be put on small businesses. "

Of course, some of us remember when President George W. Bush said in his 2004 State of the Union, "Our agenda for growth and employment should help small business owners and employees with relief from needless federal regulation ..."

Maybe I should stop quoting Presidents and start quoting country singers. As Toby Keith said that what we need is "a little less talk and a lot more action."