Man typing on a tablet

Small Business Burdened By Ever-Growing Pile Of Regulations

October 2016

A A A

Small-business owners are feeling burdened by the growing list of government regulations, according to the newest release of the NFIB Research Foundation’s quadrennial Small Business Problems and Priorities survey. The survey asked 20,000 members of the National Federation of Independent Business to evaluate each of the 75 potential problems presented to them on a scale of “1” to “7,” ranging from “critical problem” to “not a problem,” respectively. Unreasonable government regulations ranked second behind only the cost of health insurance as the most severe issue facing small-business owners. The problem has slowly climbed up the rankings over the course of the last several publications, ranking 9th in 2004, 6th in 2008, and 5th in 2012. Currently, one-third of respondents consider it to be a “critical problem.”

When asked in NFIB’s 2012 Regulations survey of small employers, 62 percent of small-business owners said that their main problem was the accumulating volume of regulations emanating from all levels of government agencies rather than specific regulations from a few agencies. This result seems to support the findings of Small Business Problems and Priorities that the issue is universal rather than targeted at specific industries or types of businesses. Every subgroup surveyed (industry, number of employees, etc.) except for businesses that were less than three years old ranked the problem in the top five.

The burden caused by the general accumulation of regulations does not mean that specific industries do not face their own unique regulatory battles. The survey includes a number of labor, safety, and environmental regulations that showed more variance between various subgroups of small businesses. For example, while the problem environmental regulations is only ranked 27th across all industries, it is the third most important problem for “Agriculture, Forestry, and Fishing.” In contrast, health and safety regulations ranks 28th across all sectors, and only rank 62nd in the “Finance, Insurance, Real Estate, Rental” industry.

Small Business Problems and Priorities also evaluated the regulatory impact on small-business owners in three states—California, Ohio, and Texas. While the three states align with the rest of the country on the degree to which unreasonable government regulations are problematic (ranking 2nd in Ohio and California, and 4th in Texas), California small-business owners find many specific regulations far more problematic than owners in Ohio, Texas, and the country as a whole. For example, mandatory family and sick leave ranks 33rd in California but only 61st overall. This is not surprising considering California implemented one of the largest paid leave mandates in the country. California respondents also evaluated environmental regulations more severely, ranking the problem 14th, while Texas respondents were less concerned, ranking the problem 41st. Ohio respondents generally evaluated regulations about the same as the rest of the country, but they did find state and local level paperwork to be a bigger problem, where it ranked 7th compared to 11th for the rest of the country. In general, Texas found the regulations the survey asked about to be less of a problem than Ohio, which in turn found specific regulations less burdensome than California.

Regulations are particularly challenging for small businesses because they typically do not retain staff solely responsible for regulatory compliance unlike their larger counterparts. Employers are often caught by surprise by new or changing rules that apply to their business. In the 2012 Regulations survey, 71% of small employers responded that they discover new and/or modified regulations in the normal course of doing business. Likewise, Finding Out about Regulatory Requirements ranked 23rd of the 75 problems.

The more burdensome regulatory landscape also creates an environment of “uncertainty over government actions” for small-business owners, the sixth ranked problem in the Small Business Problems and Priorities survey. In addition to the costs of complying with existing regulations, small-business owners are worried that there are regulations out there that they are not aware of or that agencies will publish new regulations that will be costly for their business. Over time, this drag on the economy will continue to discourage small-business owners from taking risks that could grow their businesses, create jobs, and produce new innovations.

 

This article was written by William Dunkelberg from Forbes and was legally licensed through the NewsCred publisher network.

BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may be used as a generic term to reference the corporation as a whole and/or its various subsidiaries generally.  This material does not constitute a recommendation by BNY Mellon of any kind.  The information herein is not intended to provide tax, legal, investment, accounting, financial or other professional advice on any matter, and should not be used or relied upon as such.  The views expressed within this material are those of the contributors and not necessarily those of BNY Mellon.  BNY Mellon has not independently verified the information contained in this material and makes no representation as to the accuracy, completeness, timeliness, merchantability or fitness for a specific purpose of the information provided in this material.  BNY Mellon assumes no direct or consequential liability for any errors in or reliance upon this material.