Tag Archives: Small Business

News

Niall Ferguson argues that government is making it harder to run a business

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In the Wall Street Journal.

Excerpt:

Seven years of data suggest that most of the world’s countries are successfully making it easier to do business: The total number of days it takes to carry out the seven procedures has come down, in some cases very substantially. In only around 20 countries has the total duration of dealing with “red tape” gone up. The sixth-worst case is none other than the U.S., where the total number of days has increased by 18% to 433. Other members of the bottom 10, using this metric, are Zimbabwe, Burundi and Yemen (though their absolute numbers are of course much higher).

Why is it getting harder to do business in America? Part of the answer is excessively complex legislation. A prime example is the 848-page Wall Street Reform and Consumer Protection Act of July 2010 (otherwise known as the Dodd-Frank Act), which, among other things, required that regulators create 243 rules, conduct 67 studies and issue 22 periodic reports. Comparable in its complexity is the Patient Protection and Affordable Care Act (906 pages), which is also in the process of spawning thousands of pages of regulation. You don’t have to be opposed to tighter financial regulation or universal health care to recognize that something is wrong with laws so elaborate that almost no one affected has the time or the will to read them.

[…]Each year, the World Economic Forum publishes its Global Competitiveness Index. Since it introduced its current methodology in 2004, the U.S. score has declined by 6%. (In the same period China’s score has improved by 12%.) An important component of the index is provided by 22 different measures of institutional quality, based on the WEF’s Executive Opinion Survey. Typical questions are “How would you characterize corporate governance by investors and boards of directors in your country?” and “In your country, how common is diversion of public funds to companies, individuals, or groups due to corruption?” The startling thing about this exercise is how poorly the U.S. fares.

In only one category out of 22 is the U.S. ranked in the global top 20 (the strength of investor protection). In seven categories it does not even make the top 50. For example, the WEF ranks the U.S. 87th in terms of the costs imposed on business by “organized crime (mafia-oriented racketeering, extortion).” In every single category, Hong Kong does better.

At the same time, the U.S. has seen a marked deterioration in its World Governance Indicators. In terms of “voice and accountability,” “government effectiveness,” “regulatory quality” and especially “control of corruption,” the U.S. scores have all gone down since the WGI project began in the mid-1990s. It would be tempting to say that America is turning Latin, were it not for the fact that a number of Latin American countries have been improving their governance scores over the same period.

Whatever the root causes of the deterioration of American institutions, smart people are starting to notice it. Last year Michael Porter of Harvard Business School published a report based on a large-scale survey of HBS alumni. Among the questions he asked was where the U.S. was “falling behind” relative to other countries. The top three lagging indicators named were: the effectiveness of the political system, the K-12 education system and the complexity of the tax code. Regulation came sixth, efficiency of the legal framework eighth.

Asked to name “the most problematic factors for doing business” in the U.S., respondents to the WEF’s most recent Executive Opinion Survey put “inefficient government bureaucracy” at the top, followed by tax rates and tax regulations.

The troubling thing to me is that the private sector has to make a profit in order to fund government, and I don’t see that the private sector will be able to producing the profits needed to fund our government’s lavish spending. Nothing that I see about the next generation causes me to believe that they understand economics enough to vote to improve the business climate. They seem to be very much anti-business. One wonders where they expect to find jobs.

News

How the new Obamacare mandates are reducing full-time employment

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From the Wall Street Journal.

Excerpt:

Here’s a trend you’ll be reading more about: part-time “job sharing,” not only within firms but across different businesses.

It’s already happening across the country at fast-food restaurants, as employers try to avoid being punished by the Affordable Care Act. In some cases we’ve heard about, a local McDonalds has hired employees to operate the cash register or flip burgers for 20 hours a week and then the workers head to the nearby Burger King or Wendy’s to log another 20 hours. Other employees take the opposite shifts.

Welcome to the strange new world of small-business hiring under ObamaCare. The law requires firms with 50 or more “full-time equivalent workers” to offer health plans to employees who work more than 30 hours a week. (The law says “equivalent” because two 15 hour a week workers equal one full-time worker.) Employers that pass the 50-employee threshold and don’t offer insurance face a $2,000 penalty for each uncovered worker beyond 30 employees. So by hiring the 50th worker, the firm pays a penalty on the previous 20 as well.

These employment cliffs are especially perverse economic incentives. Thousands of employers will face a $40,000 penalty if they dare expand and hire a 50th worker. The law is effectively a $2,000 tax on each additional hire after that, so to move to 60 workers costs $60,000.

A 2011 Hudson Institute study estimates that this insurance mandate will cost the franchise industry $6.4 billion and put 3.2 million jobs “at risk.” The insurance mandate is so onerous for small firms that Stephen Caldeira, president of the International Franchise Association, predicts that “Many stores will have to cut worker hours out of necessity. It could be the difference between staying in business or going out of business.” The franchise association says the average fast-food restaurant has profits of only about $50,000 to $100,000 and a margin of about 3.5%.

Because other federal employment regulations also kick in when a firm crosses the 50 worker threshold, employers are starting to cap payrolls at 49 full-time workers. These firms have come to be known as “49ers.” Businesses that hire young and lower-skilled workers are also starting to put a ceiling on the work week of below 30 hours. These firms are the new “29ers.” Part-time workers don’t have to be offered insurance under ObamaCare.

[…]A 2012 survey of employers by the Mercer consulting firm found that 67% of retail and wholesale firms that don’t offer insurance coverage today “are more inclined to change their workforce strategy so that fewer employees meet that [30 hour a week] threshold.”

The biggest problem I have with these socialist policies like Obamacare is that they often affect people who didn’t vote for Obama. It wouldn’t bother me at all if only Democrats were harmed by Democrat policies. But I don’t like it when innocent people who didn’t want these policies have to suffer the consequences of Democrat policies. Maybe we just need to be better at explaining things to Democrats using very simple words before the next election, so that they can vote for competence and results instead of voting for charisma and rhetoric.

News

Unemployment rate rises: 169,000 more people not in labor force

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First, I hope everyone remembers about the William Lane Craig vs Alex Rosenberg debate tonight at Purdue University. There is live-streaming available, details here.

And now, three scary stories from CNS News.

First, this one about the recent depressing jobs report.

Excerpt:

The number of Americans not in the labor force grew by 169,000 in January, according to the Bureau of Labor Statistics’ latest jobs report.

BLS labels people who are unemployed and no longer looking for work as “not in the labor force,” including people who have retired on schedule, taken early retirement, or simply given up looking for work. There were 89 million of them last month.

[…]The nation’s unemployment rate increased a tenth of a point in January, rising to 7.9 percent from 7.8 percent, a level the Labor Department described as “essentially unchanged.”

Second, this one about Obamacare health care plans.

Excerpt:

In a final regulation issued Wednesday, the Internal Revenue Service (IRS) assumed that under Obamacare the cheapest health insurance plan available in 2016 for a family will cost $20,000 for the year.

Under Obamacare, Americans will be required to buy health insurance or pay a penalty to the IRS.

The IRS’s assumption that the cheapest plan for a family will cost $20,000 per year is found in examples the IRS gives to help people understand how to calculate the penalty they will need to pay the government if they do not buy a mandated health plan.

The examples point to families of four and families of five, both of which the IRS expects in its assumptions to pay a minimum of $20,000 per year for a bronze plan.

And finally, this one about Obamacare’s effect on job creators, aka “the rich” who need to “pay their fair share”.

Excerpt:

Sixty-one percent of U.S. small business owners said they were “worried about the potential cost of healthcare” and 56 percent said they were “worried about new government regulations,” according to the Wells Fargo/Gallup small business index released on Jan. 31, which also showed that 30 percent of small business owners are not hiring and fear going out of business within a year.

“At the bottom of the list, but still at a surprisingly high level, 30% of owners say they are not hiring because they are worried they may no longer be in business in 12 months,” according to Gallup’s index summary. “This is up from 24% who had the same worry in January 2012.”

[…]Gallup said the reasons given for less hiring, such as healthcare and government regulations, are “troublesome” and have negative implications for the U.S. economy.

Bad news! I remember the good old days of the Bush administration, when we had lower taxes, a 4.4% unemployment rate, and a $160 billion dollar budget deficit. Maybe watching tonight’s debate with WLC and this Duke University naturalist tonight will cheer me up.