The government imposes a regulatory cost of doing business in this country that is enormous for any company, but it hits small establishments particularly hard.
Recent research from the Small Business Administration’s Office of Advocacy found that complying with federal regulations costs companies $1.1 trillion a year, about half of the federal government’s budget and about 11 percent of the entire domestic economy.
Moreover, the regulatory burden, as anyone involved with it knows, is on a growth trajectory. Will we look back on this another “legacy” of the Bush administration?
For large firms – those with at least 500 employees – the regulatory burden comes out to $5,282 per employee. But small businesses, those with fewer than 20 workers, appear to be punished for their lack of size. Their hit is $7,647 per employee.
Think about it: Eliminate the regulation and every small business could afford to provide health insurance.
Small businesses are the growth engine of the American economy. According to the SBA, small businesses:
- Employ half of all private sector employees;
- Pay 44.3 percent of the total U.S. private payroll; and
- Create more than half of nonfarm, private gross domestic product.
But here’s the real eye-opener: As many as eight of every 10 new jobs created each year are generated by small businesses. Without such a soaring hurdle of regulation compliance, how many more jobs could small businesses create? How much more could they contribute to the economy?
The costs of compliance are not a direct tax, but the result is the same. Small businesses and the economic power they produce are being held back substantially. The harmful effects, of course, go beyond the businesses and employees and affect the overall economy.
The SBA’s findings are available to every member of Congress, where the laws that trigger the regulatory rules are concocted. But lawmakers aren’t going to do anything about the regulatory burden until enough small business owners stand up and tell the government to take care of its own business, not theirs.