As I noted in October column, in all the years I have been consulting and analyzing this industry, I have yet to meet an owner who could look me straight in the face and suggest that items like healthcare costs, immigration and increasing government regulations were putting him out of business. Although I have encountered thousands of troubled print shops over the years, I never encountered a single printing firm where burdensome government regulations were the root cause or even a secondary cause for their problems.
Nightmare Stories do Exist
Now, make no mistake about it. I will acknowledge and admit there are indeed some nightmare stories out there involving OSHA inspections, COBRA regulations, fire inspections, inheritance taxes, etc.
After my October column appeared, I heard from one reader named Jim, who complained vociferously against all the regulations, state and federal, that he has had to battle.
Interesting to note is that Jim’s business has annual sales in excess of $5.5 million, and when I do hear stories about unreasonable and expensive OSHA and fire inspections, etc. they tend to involve larger firms like his. Why? I suspect that it is their size that makes them show up more on government radar screens, but I really don’t know.
Of course, the more employees, the more like you are to have some rotten apples and the rotten apples are often the first to complain about the smell in the barrel. Is it fair that the government seems to target larger firms? Of course not, but at least the larger firms are in a better position financially to weather these regulation storms when they occur.
Jim wrote me a lengthy email detailing his frustrations and, to be honest, I had great sympathy with many of his complaints. At one point in his email, Jim noted, “In New Jersey I pay such taxes as the Right to Know Tax, the Hazard Occupancy Tax, the Litter Control Tax, and the Catastrophic Illness Tax, along with the most expensive real estate taxes in the nation. As far as I can tell, most of these payments that I make don’t do anything other than support a bloated bureaucracy.”
At first I thought Jim was pulling my leg with some of these taxes, but when I checked them out I found, yup, they exist. Two other things I noted as well. First, many of the taxes in New Jersey and other states often tend to exempt small businesses, but they do hit larger businesses pretty hard. Second, many of the situations and regulations being complained about exist at the state and not the federal level. Even in the case of federal regulations, they are often subject to enforcement by state agencies, so it is a bit difficult to know where to lay the blame.
Regulations Strangling Business?
Less than two weeks after writing my October column, CNN Money ran a fascinating article titled, “Regulation: Not the job killer GOP says.” The column targeted the argument that asks, “Want to help the economy and create jobs? Well, roll back those government regulations! It’s a talking point trumpeted by nearly every Republican politician. But, would less regulation really spur hiring?”
In the CNN story, the author refers to the often-quoted argument that says, “Thanks to the Obama administration, a wave of new government regulations are strangling business to the detriment of hiring and economic growth. But in an economy with serious structural problems, a crippled housing market and slack demand, is government regulation really holding back the labor market?”
CNN’s answer? Not so much, at least according to government data and surveys of business owners and economists. According to the report, only a small percentage of employers list government regulations as a reason for laying off workers. According to data on mass layoffs published by the Bureau of Labor Statistics, only 2,085 new unemployment claims in the first two quarters of this year were attributed to government regulation, while 55,759 were tied to insufficient demand, notes the CNN story. According to the Quick Consultant’s little calculator, that means that less than four percent of unemployment claims were the result of government regulations!
The story goes on to note that “less than 20% of small business owners cite government regulations as their most important problem,” according to a survey by the National Federation of Independent Business. Poor sales, notes the NFIB, were a much bigger worry. CNN Money also went on to report in its story and that only two (less than 13 percent) of 16 economists questioned for the survey said that government regulation was the biggest drag on the labor market. 0:00 / 3:37 Gas pipeline CEO backs more regulation Gary Burtless, a labor economist at the Brookings Institution, said there is little evidence to suggest that government regulations are killing jobs, added CNN Money.