Regulating The Rhetoric On Job Creation

Creating JobsCreating jobs is a major concern for all politicians. Subsequently, discussions regarding how to improve the job market are often a topic among those who follow politics. My colleague Charles Owens the director of the Michigan Branch of the National Federation for Independent Business (NFIB) recently penned an article discussing how the Federal regulatory environment affects small business.

To support his stance Charles supplies a number of statistics. Unfortunately many of those statistics are in error or are inconsistent. For example he states that small business creates two thirds of all new jobs – a claim that Mitt Romney made during his run for president. The reality is that small business actually only account for around 26% of new jobs.

Next Charles argues that the regulatory burden on small business is more than that of large companies. While this number is backed with actual data it is disingenuous to suggest that two-thirds of all jobs are created by small business and then imply that those companies incur more costs. The two-third claim is based on companies with 50 or less employees while the data surrounding the extra costs of regulations only includes companies with 20 or fewer employees. Perhaps the burden is equal among these two groups but the data set is different and implies a conclusion not stated by the report Charles quotes.

The final piece of data Charles uses to make is point is not surprisingly a poll conducted by the organization of which he is a ranking member. The claim is that “unreasonable government regulations” ranks as the fifth most concerning issue for small business. The real surprise is that the number is not higher after all who supports “unreasonable” regulations? Ask any of the supposed regulation loving Democrats you know if the regulations they support are “unreasonable” and the response will universally be no.

But even beyond this stacking the deck tactic this data is highly suspect given that the nearly 100% of the NFIB’s political contributions in 2011-2012 went to support Republicans or attack Democrats. Additionally the NFIB represents around 350,000 businesses while the US currently contains 23 million small businesses. This means this poll represents a tiny portion of the overall small businesses and they’re oversampling Republican lead companies.

Of course it should be noted that the NFIB isn’t the only organization to poll small businesses. A Gallup poll found that small businesses number one reason for not hiring new employees was because they “Didn’t need any additional employees at this time”. For these companies it wouldn’t matter how much regulations affected their business. They won’t hire any way. As a matter of fact government regulations are sixth out of seven categories on why companies aren’t hiring.

The reality is that business supports plenty of regulations. What one company may see as a burden another may see as leveling the playing field. If the goal is to remove regulations because the public and companies agree the regulation is unreasonable, most would support such a plan. But to attack regulations as some ubiquitous evil in the name of jobs is a massive oversimplification of the issue.

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