Small business is still the backbone of the U.S. economy. New Hampshire’s economy is dominated by small business. There are more than 30 million small businesses in America. They employ about 60 million workers. That’s half of the U.S. workforce. Small businesses account for 99.9% of all U.S. businesses. These days many are exporters. They compete not just locally, but nationally and in the global marketplace. They connect the local economy to the rest of the world.
Millennials
Nearly 20% of all small business owners are 35 or younger. Millennials are turning their entrepreneurial ideas into real-world economic impact. The state of the small business community is the most important indicator of our country’s economic health. When small business owners have the resources to create jobs and expand operations, the effects are felt throughout the economy. If New Hampshire does not pick up the welcome mat in the face of small business we are all benefitted.
Roughly two-thirds of small business owners “… have a positive outlook on their companies and the economic environment…” from the MetLife and U.S. Chamber of Commerce Small Business Index (SBI). But that is expected because entrepreneurs are positive people. Small businesses simply don’t work without that ingredient. So their view is necessarily skewed in that direction. They are not only ambitious people they are good people and fun to be around.
Governmental impacts
In 2018 over 25% of small business owners planned to increase investment in the next year. About 29% hoped to hire more workers. Those figures have since slipped. The SBI’s overall score has dipped from 69.3 in the Q4 of 2018 to 65.6 in Q1 of 2019. Plans to invest and hire are also dropping off. Some blame the dip on uncertainty over the recent government shutdown causing businesses to pause. It is significant for the dip itself and for recognition of the massive weight of government.
On the bright side, the labor market remains robust. Based on the National Federation of Independent Business’ (NFIB) most recent Jobs Report, small business job creation shows a net addition of 0.52 workers per firm. The government shutdown scare is in the rearview mirror for now. We need to think about the need for more certainty about the future.
What works
Consistency in policy, spending policy, tax policy and regulatory policy is the best thing government can do for the small business half of the economy. It is important to continue the policies that have produced positive results; tax reduction and deregulation. Those steps leave small business with more resources for investment in capital and people. When business is allowed to do more government is needed to do less.
Free-market policies provide a dose of certainty. It’s no coincidence that small business optimism has slipped since 2018. Last July, nearly half of the small business community reported plans for investment. Investment and expansion are more likely when small business owners send less of their hard-earned money to the Taxman.
Keeping more in the form of investable capital is the best way to grow business and it allows the flexibility to increase wages. Prosperity is shared. That’s how success grows; by sharing prosperity. The more resources are needed to pay taxes and deal with red tape; fewer resources are left for employees and families.
The same logic applies to deregulation. Your typical small business owner spends at least $12,000 per year dealing with federal, state, and local regulations according to a recent National Small Business Association survey. In its first year alone, a start-up spends an average of $83,000 on regulatory compliance.
Conclusion
The more we do to alleviate the burden of government, the more small business owners feel optimistic about their finances. That optimism leads to real-world benefits. Small business affects millions of hard-working Americans. It boosts the economy. Without small business the economy isn’t going anywhere.
Small business is important, and small business needs another shot in the arm. What the New Hampshire legislature is doing is a shot in the head. What small business does not need is an increase of 16.8% in taxation, electric rate hikes in support of subsidies and more growth in government programs, most especially from government whose policies are vascillating.
Ref:
Catalyst, Luka Ladan, April 3, 2019