This week, I had the opportunity to share ILSR’s research with members of Congress at a hearing organized by the Congressional Progressive Caucus. The forum, chaired by Representatives Keith Ellison and Raúl Grijalva, focused on how federal contracting and other forms of financial support for business should be overhauled to reflect American values and build the kind of economy we need. The hearing featured perspectives from both low-wage workers and independent businesses.
As I noted in my testimony, much of federal policy now works to bend the marketplace in favor of big corporations, putting both workers and small businesses at a competitive disadvantage. Federal subsidies, tax credits, loan guarantees, and other public benefits skew heavily in favor of large, low-wage corporations over responsible small businesses.
I highlighted one opportunity in particular for reform: loan guarantees provided by the U.S. Small Business Administration (SBA). Over the last ten years, the SBA has backed loans to over 30,000 retail and fast food franchises, like Quiznos and Subway. Not only do these outlets often pay rock-bottom wages, but the local entrepreneurs who ostensibly own these businesses generally have very little control over them and forfeit much of the revenue to the franchise parent company. Worse, more than one in four of these businesses failed, leaving both the local owner and the SBA on the hook, while the franchise parent company made off with sizable profits and no liability for the default.
The eligibility criteria for SBA loan guarantees, ILSR believes, should be revised to eliminate support for low-wage franchises and instead expand lending for independent businesses that contribute to the well-being of their communities.
Testimony of Stacy Mitchell
Co-Director, Institute for Local Self-Reliance
Ad Hoc Hearing of the Congressional Progressive Caucus
April 15, 2015
Good afternoon, Congressman Grijalva, Congressman Ellison, and other members of the Congressional Progressive Caucus. Thank you for the opportunity to testify here today. Continue reading