Regulatory state hinders women-led business

By: Heidi Ganahl

Appeared in The Westerly Sun on May 7, 2015


President Barack Obama tells us that the economy is alive, but Main Street tells us that small business is dying. For the first time in recorded history the number of business closures – appropriately called “deaths” by the Census Bureau – outnumber starts.

That’s bad for the country, which depends on small business to employ half of its workforce and create two-thirds of its new jobs. It’s especially bad news for women, who disproportionately run small businesses.

There are now more than 10 million women-owned businesses in the country, employing more than 13 million people and generating $1.9 trillion in sales. That’s a 60 percent increase since 1997.

Clearly women-owned businesses are critically important to the country’s economic success, and if women’s potential were truly unleashed, they could help revive Main Street.

But the fact is women’s economic participation is still significantly less than men’s, and the growth of the female labor force has noticeably flatlined under this president. The World Economic Forum estimates that if this gap were closed, GDP would increase by double-digits.

Unfortunately, high profile policymakers continue to misdiagnose the problem as being the result of a mythical “pay gap” between women and men. They should know better. When you control for occupation, hours worked, schooling, and years in the workforce, the supposed pay gap disappears. In fact, childless women between ages 22 and 30 earn more than their male counterparts in most U.S. cities.

Rather than additional mandates on business, we need to strip away the existing ones that keep women and small business down.

The number of “economically significant” regulations has grown by about 50 percent over the last six years. They prove to be a Gordian knot that only big businesses have the resources and influence to untangle. Small and women- owned business have little hope against them.

Take the Dodd-Frank financial regulations, for example. Their burdensome compliance policies have strangled the community banks that have long provided the loans to family and women- owned businesses, limiting their ability to expand. In fact, the country has lost about 10 percent of its small banks since the law came into effect. Meanwhile the big banks, which spend a much lower percentage of their budgets on regulatory compliance, are there to pick up the pieces and consolidate power.

A similar story exists with the Affordable Care Act. Rather than reign in the insurance companies like it was intended to do, its thousands of mandates have made it extremely difficult for new insurance companies, which could potentially undercut the prices of existing ones, to form. Small businesses are left with few options and sky-high premiums as a result, while big insurers are left with little incentive to innovate or practice price discipline.

The unintended consequences of these regulations – entrenching big business at the expense of small – is a template for how most regulations play out in practice. In this sense, regulations are often good for big business because they destroy small business competitors who cannot contend with them.

The data backs this up. According to Gallup, the United States now ranks 12th in the world for business startups, behind such countries as Hungary, Denmark, Finland, New Zealand, and Israel. But you don’t have to look at the data, just look at the state of small business in your community.

While big businessmen like Bill Gates and Mark Zuckerberg are glorified because of their flashy products, it’s time to also recognize small businesswomen like Laura Kozelouzek and Shelly Sun. The businesses they lead – Quest Workspaces and Brightstar Care – are among the millions of small businesses that are the real drivers of the economy. Their struggles with the regulatory state need to be heard.

To truly unlock the economic potential of women, we must dramatically simplify our regulatory framework. This would allow their businesses to flourish and expand, helping reverse the decline of small business in America and breathe new life into Main Street.

 

Heidi Ganahl is the founder of Camp Bow Wow and a member of the Job Creators Network.