PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

National Entrepreneurship Week and the Policy Climate

By at 23 February, 2021, 12:54 pm

Small Business Insider

by Karen Kerrigan-

ICYMI, last week was National Entrepreneurship Week and SBE Council celebrated by sharing the good news about the state of U.S. entrepreneurship and new business creation.

Sadly, as a result of COVID-19, a massive number of businesses have shut their doors for good. However, according to the Census Bureau’s Business Formation Statistics series, the transformative environment created by COVID-19 is generating many new businesses and entrepreneurs.

Believe it or not, 2020 smashed expectations for new business applications – these totaled 4.5 million, which was 24.3% higher than 2019 (and 51% higher than the 2010-19 average, according to the Economic Innovation Group.)

High-propensity applications, those businesses that will likely become employers, also shot up 15.5% from 2019, and was 22.9% above the 2010-19 average. In total, high propensity business applications increased in 2020 by more than 205,000 over 2019.

The Retail Surge: Remember the so-called “retail apocalypse” in 2018-2019? It did not happen.  And now, many are predicting that COVID-19 will be the final death blow for retail. This is simply not the case. Business applications in the retail sector actually saw the biggest jump in new applications from 2019 to 2020 – up 54%! Non-store retail trade applications (online retailers) increased 77%.

Evidently, American retail is alive and well, driven by significant opportunity in the digital economy. These new businesses need every opportunity to succeed, which includes a friendly policy climate.

President Biden and Congress must help these new businesses launch and grow by providing a stable policy environment. One that does not impose added costs or barriers through higher taxes and new regulatory burdens. These are the types of policies that will undermine critical entrepreneurial activity.

SBE Council has been warning about the consequences of a $15 minimum wage hike during this uncertain period (see more on this below). And why new tax and regulatory threats weaken entrepreneurship, small business recovery, investment, job growth and prospects for returning to strong economic growth. We feel we are making headway on some issues in Congress and with the Administration, but much work remains.

For example, it is weirdly fascinating to hear and watch some in Congress relentlessly beat down (through congressional hearings, legislation and other policy tools) on America’s technology sector and online platforms, which have served as a lifeline for millions of small businesses both prior to the pandemic and during the COVID-19 crisis. Online platforms and digital tools have helped small business owners pivot, run their businesses virtually, market and sell their goods and services, and fulfill customer orders.

Platforms help small businesses reach customers where they are – which is online!

Not surprisingly, small businesses have increased their use of digital tools and platforms. According to a February 19 survey and report (U.S. State of Small Business) co-published by Facebook and the Small Business Roundtable, 34% of businesses have increased their use of online or digital tools since the pandemic began.

The focus for Congress and the Administration needs to be on vaccine distribution and economic recovery, not undermining American technological innovation and opportunities for small businesses to start and grow a business. For example, a House Judiciary Committee hearing (the first in a series) on Feb. 25 will look at the “abuse of gatekeeper power” and “lowering barriers to entry.” Suffice it to say that if abuse was occurring and barriers were high, small businesses wouldn’t be flocking to these platforms to reach and serve customers. In addition, entrepreneurship and new business creation in general would not be as healthy as it currently is.

Despite a significant amount of pain in the economy, individuals and small businesses are pivoting and finding new opportunities as a result of technology and broadband. Given the fragility of the recovery and vast uncertainties that continue to exist, disruptive regulatory and/or tax policy must be abandoned. Congress and the Administration must focus on how to support all American businesses through the COVID-19 crisis. As this coalition letter signed by SBE Council conveys about efforts to intrusively go after American technology companies, as some are doing due to politics or ideology:

“Congress should not change substantive laws to address political or ideological concerns about the companies in question. This is also the wrong message to send to entrepreneurs who are actively working to provide Americans with competitive alternatives to today’s household names.”

More to come on this important issue.

Reports Consistently Point to Potential Big Damage Inflicted by $15 Minimum Wage Hike

Growing Democrat unease about including a $15 minimum wage hike in the $1.9 trillion spending package moving through Congress has been fueled by constituent pressure and the latest round of reports that point to job loss and the pain to small businesses of moving forward with the wage hike. For example:

Congressional Budget Office (CBO) Report: Phasing in the federal minimum wage to $15 per hour, as President Joe Biden has proposed and as provided for in the “Raise to Wage Act,” and included in the $1.9 trillion package moving through the House, would cost 1.4 million jobs over the next four years, according to a CBO report.  According to CBO:

● “Higher wages would increase the cost to employers of producing goods and services.”

● “Employers would pass some of those increased costs on to consumers in the form of higher prices, and those higher prices, in turn, would lead consumers to purchase fewer goods and services.”

● “Young, less educated people would account for a disproportionate share of those reductions in employment.”

National Restaurant Association: A February 2021 survey by the association found the initial phase of the wage hike ($7.25 to $9.50) and federal tipped wages ($2.13 to $4.95) would have a negative impact on 82% of restaurants’ ability to recover (only 2% said it would have a positive effect).

After the wage is fully phased in to $15 and tipped wage eliminated:

● Nearly all restaurant operators (98%) say they will increase menu prices as a result of the higher minimum wage levels.

● Eighty-four percent of restaurant operators say they will likely cut jobs and employee hours from normal levels, while 75% say they will cut employee benefits from normal levels.

● Sixty-five percent of operators say they will likely add equipment or technology that reduces the need for employees in their restaurant.

As SBE Council president & CEO Karen Kerrigan noted before House Small Business Committee in her testimony on February 4, “Many [small businesses owners] will throw in the towel for sure. Businesses will be lost, worker hours reduced, jobs will be lost, and it will be very difficult to raise prices given the current economic climate and the fact that small businesses have to compete against larger businesses” better equipped and capitalized to deal with cost increases.

The House Small Business Committee will address the issue on February 24 at a hearing, and SBE Council will weigh in with a letter highlighting the big downside of imposing new labor costs on small businesses, especially during a time when they are hurting, backlogged with bills, and still reeling under lower revenue streams.

Moving forward on policy and legislation, Congress and the Biden Administration must focus on policies that will uplift small business – in fact, all American businesses. We won’t get out of this big economic and jobs hole by piling more costs and burdensome regulations on private-sector businesses.  And the way to encourage more business creation and help those who have taken the first step in starting a business is to send a clear policy signal that Washington will not, and doesn’t plan to, punish risk-taking and entrepreneurial success.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.

 

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