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A Small Business Boost from … Regulations?

| Written by ILSR Admin | 1 Comment | Updated on Sep 7, 2012 The content that follows was originally published on the Institute for Local Self-Reliance website at https://ilsr.org/small-business-boost-regulations/

Yes Magazine, September 7, 2012

If last week’s Republican National Convention had a mythic protagonist (other than Mitt Romney, that is), it was the struggling small business owner. In speech after speech, we heard about the same basic person in the same basic dilemma: a small business owner overcome by the burden of government regulations.

This isn’t exactly a surprise; lashing out at regulations has become daily bread for the GOP lately, and the narrative has been eagerly parroted by the media (an April analysis by the Institute for Policy Integrity found that use of the phrase “job-killing regulations” by U.S. newspapers has increased by more than 17,000 percent since 2007).

Indeed, many small business owners report that regulations are their biggest obstacle to success. But are they really?

This spring, the service directory Thumbtack.com and the Ewing Marion Kauffman Foundation asked small business owners across the nation to rate how friendly their states—and particularly their states’ regulations—were to small businesses. Their answers generally matched conventional analysis: Utah and Texas, with fewer and looser regulations, scored well, while states with more aggressive environmental and labor standards, such as Vermont, California, and New York, scored worst.

But researcher Stacy Mitchell of the Institute for Local Self-Reliance noticed something odd: Comparatively speaking, many of the states with the best scores, and the loosest regulations, weren’t actually home to very many small businesses:

Vermont, for example, which earned an “F” in the ranking, in part because of its cumbersome environmental and zoning regulations, has nearly twice as many small businesses per capita as laissez-faire Texas, which scored an “A+.” Low-ranking New York and Rhode Island likewise have more small businesses than most states.

Of the five most “friendly” states, only one, Idaho, outperforms the national average on numbers of small businesses. The other four lag behind, with Louisiana ranking 36th and Texas 47th in the nation.

In other words, our expectations about the impact of regulations don’t necessarily line up with reality.

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Read the full story here.

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  • I submit that there is an other possible explanation for the statistics presented.

    I believe that states that are business friendly may have fewer small businesses because the business will not stay a small business for a long time. In a business friendly environment the business will grow.

    There is a significant impact on the business operational structure when it grows above the small business status.

    It may be helpful to research the impact of a small business operation vs a large business operation in terms of regulation on a state by state basis for the top and bottom 5 states.

    Then I believe a reader will see the regulation impact on business and why management decides not to grow beyond the small business status but to open an other small business and work as a matrix organization.