Making Small Businesses Great Again

By: Alfredo Ortiz

Appeared in Medium on November 28, 2016


The results of the elections are in. New political leaders were elected for all levels of office — ranging from local legislatures to the President of the United States. Their hard fought campaigns have come to a halt and now it’s time for the real work of governing to begin. And it should start with small businesses.

Small businesses are the lifeblood of the American economy. There are over 28 million of them in this country — employing 56.8 million Americans or almost half of the working population. Together that’s roughly 85 million people that are dependent on small businesses. More importantly, they are the driving force behind job creation. In 2013 alone, small businesses introduced over 1 million net new jobs into the economy.

However, small business owners are under attack by government policies that are restricting their ability to hire more employees and grow their companies. The election welcomed another wave of these crippling mandates. Four states — Arizona, Colorado, Maine, and Washington — voted in favor of ballot initiatives to dramatically raise their states’ minimum wage to $12 and $13.50.

While minimum wage hikes might sound like a great way to help the working poor, these wage hikes, and others like them, spell disaster for small businesses. They effectively mandate an increase in entry-level labor costs — leaving small businesses with a difficult decision about how to best absorb extra costs and keep their doors open. Unlike large corporations, small businesses have tight budget margins and they can no longer keep up with the increasing cost associated with doing business.

Seattle, which is phasing in a $15 entry-level wage, has already experienced reduced job growth. A group of University of Washington economists found that the entry-level employment rate is already 1 percentage point lower than it would have been without the wage hike. And as the wage continues to increase, the negative effects will worsen and those it was intended to help might find themselves unemployed.

In addition to fighting increased entry-level wages, the new administration can tackle a few other challenges to reduce the burden on small businesses: Dodd-Frank is a set of regulations that makes it difficult for small businesses to access lines of credit, which halts a business before it even has a chance to get off the ground. The Affordable Care Act forces businesses to provide healthcare if they employ 50 or more full-time employees. And the new overtime rule that goes into effect December 1st doubles the previous salary level exemption for overtime pay, leaving businesses with the difficult choice of either increasing costs or reducing labor hours for employees.

The trend of burdening small businesses with government policies is troublesome and needs to be stopped. A nationwide survey of small business owners commissioned by the Job Creators Network earlier this year supports those concerns. It concluded that overregulation, overtaxation, and lack of access to credit are the main challenges facing business owners. Roughly two-thirds of respondents said overtaxation and overregulation are preventing their businesses from thriving and only one in five small-business owners plans to hire additional employees over the next year. Furthermore, only one in four believes conducting business this year will be easier than the last.

The Job Creators Network has been able to hear the concerns of these small businesses first-hand over the past few months on the Bring Small Businesses Back bus tour. We traveled 10,000 miles and brought together nearly 20 U.S. Representatives, seven governors, small business leaders and community members in nearly 30 locations in 17 states.

These challenges give the new Trump Administration and what will be the 115th Congress an opportunity to break down the barriers for small businesses and usher in an era of job creation. By challenging broad issues like overregulation, overtaxation, and lack of access to credit, they can make small businesses great again.

Alfredo Ortiz is president and CEO of the Job Creators Network.