How much does politics mean to small business?

Filed in archive Bootstrapper News on December 7, 2006

With a new majority taking control not only in Washington, but here in the Pennsylvania House of Representatives as well, some business leaders might see big changes ahead.

But not small business leaders, according to Renuka Rayasam of U.S. News & World Report.

Small surprise when you consider the findings of a 2001 report on the impact of regulation on small business, a subject that seems to be high on neither major party's agenda.

In "Giving a Leg Up to Bootstrap Entrepreneurship: Expanding Economic Opportunity in America's Urban Centers" authors Samuel R. Staley, Howard Husock, David J. Bobb, H. Sterling Burnett, Laura Creasy, and Wade Hudson argue:

Government regulations can have a debilitating impact on economic growth and entrepreneurship despite the most noble of intentions. By preventing entry, and raising entry costs (including extensive and onerous application procedures), local laws and regulations can have the unintended impact of greatly increasing costs that stifle business formation. These regulations have an especially pernicious effect on small businesses with slimmer profit margins and less capital and other resources (including time) to comply with rules and regulatory mandates.

The study also observes:

Rochester Institute of Technology economist Thomas Hopkins estimates that the annual cost of federal regulations alone exceeded $700 billion in 1999, or more than $7,000 per household. More importantly, Hopkins estimates the average cost to businesses varies inversely with size:

• Businesses with 19 or fewer employees face an average regulatory burden of $5,545 per employee;

• Businesses with between 20 and 499 employees face an average annual regulatory burden of $5,195 per employee;

• Businesses with 500 or more employees face an average annual regulatory burden of $2,921 per employee.

Read the rest of the rather lengthy report here along with more information about the authors. And for another post on what the study has to say about the impact of small business regulation on urban poverty see this.