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Why more businesses are closing than opening

July 2, 2014

nfib-logoBy Jan Meekcoms
Oregon NFIB

Ignore the hot-now “Kimye” wedding shots. Leave banning genetically modified crops out in the field. A real, and much more serious, issue is before every candidate and elected official in America, and we all have a duty as citizens to make sure they are at least aware of it.

The Brookings Institution released a study, Declining Business Dynamism in the United States, that should alarm us all, and get elected officials debating the course of corrective action. Did you hear about it?

“I am fearful that this critically important study is not being noticed because it’s not about Wall Street,” wrote U.S. News contributor Jean Card, one of the few to report on the Brookings’ study. “The political class only really cares that the Dow hit a record high last week.”

The political class in Salem and in Washington, D.C. had better start caring in a big way. Highlights from the research done by economists Ian Hathaway and Robert Litan include:

• “… business deaths now exceed business births for the first time in the thirty-plus-year history of our data.”

• “Firms and individuals appear to be more risk averse … businesses are hanging on to cash, fewer people are launching firms, and workers are less likely to switch jobs or move.”

• “…the decline in dynamism hasn’t been isolated to particular industrial sectors and firm sizes … the decline in dynamism has been nearly universal geographically the last three decades— reaching all fifty states and all but a few metropolitan areas.”

According to Merriam-Webster, an entrepreneur is “one who organizes, manages and assumes the risks of a business or enterprise.” They are the risk-takers and playmakers of our economy.

As a small-business lobbyist, it will forever be my job to remind legislators of two very important facts: Small businesses employ more working Americans than big businesses do, and they are not just smaller versions of bigger companies—they have different difficulties in remaining solvent. Tend to those, and you’ll have a business dynamism that creates jobs.

The issues are no mystery. Taxes and regulations – the same ones big businesses must abide by – fall harder on small businesses, which have fewer resources to absorb them and no high-priced CPAs at all to handle them.

“Small businesses significantly impact Oregon’s economy,” reports the U.S. Small Business Administration’s Office of Advocacy. “They represent 97.6 percent of all employers and employ 55.5 percent of the private-sector labor force. Small businesses are crucial to the fiscal condition of the state and numbered 344,722 in 2010. Most of Oregon’s small businesses are very small … most employers have fewer than 20 employees.”

Although huge in number, small businesses are less likely to have influence, I believe, solely because most legislators do not understand them. They are not Nike, but explaining that – and having them comprehend it – has been hit and miss.

All businesses must carry workers’ compensation insurance, pay unemployment insurance taxes, and comply with local, state and federal regulations, but as Professor W. Mark Crain of Lafayette College in Pennsylvania notes, “… small businesses face an annual regulatory cost of $10,585 per employee, which is 36 percent higher than the regulatory cost facing large firms.”

While neighboring states try and help small businesses a little, Oregon can be downright hostile. How else to explain the tax reduction given small business in the 2013 special session, with an attempt to swipe it back in the 2014 session. Add the threat of mandated paid sick leave, minimum wage increase, new street fees, the unaffordable care act, mandated retirement plans and you get a glimpse of entrepreneurs as an endangered species.

Six state senators  have no opponent in November, and 26 candidates running for seats in the State House have a free ride, too. Sounds like Oregon suffers from declining political dynamism as well. If you yearn for family wage jobs, strong schools and a robust economy, identify and support business-friendly candidates grounded in how the real world of entrepreneurs works.

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Jan Meekcoms is Oregon state director for the National Federation of Independent Business.

[hyperlinks]

Card link http://www.usnews.com/opinion/blogs/opinion-blog/2014/05/08/dont-ignore-the-brookings-study-on-declining-us-entrepreneurship

Brookings study http://www.brookings.edu/~/media/research/files/papers/2014/05/declining%20business%20dynamis m%20litan/declining_business_dynamism_hathaway_litan.pdf

Oregon SBA link

http://www.sba.gov/sites/default/files/or12.pdf

http://www.salembusinessjournal.com/pdf/2014_05_sbj.pdf

  
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Discuss this article

Bob Clark July 2, 2014

Wonder if the number of closes exceeds the number of creations for small businesses in Oregon. The government needs to scale back regulation for small business, possibly to 1990 like regulation to give small business a relatively low cost form of government help.

R M February 27, 2016

Marxist Governor …welfare is there goal and it working fine..cloward and piven strategy

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