Create Jobs: Release Small Business From Misguided Governmental Constraints - Support The Atlantic Legal Foundation

Tuesday, October 23, 2012 - 15:28

By the time you receive the print version of The Metropolitan Corporate Counsel, the election will be over.  Both candidates have promised that they will increase the number of jobs. Joblessness is harmful to all businesses because it reduces consumption.  

During the campaign, the candidates insisted that job growth depends largely on the growth of small business. However, small business has not been playing that role in this recession.

Let’s cut to the truth. If we follow on our present course, it is unlikely that small business will produce the anticipated impetus to our economy and job creation. Federal and state legislators and regulators have for years been piling up complex laws and regulations that deter those who may wish to start or continue a small business. Passing unfunded mandates that burden business is frequently viewed as an easy path to political success. State governments are particularly at fault because they have the most immediate interface with small businesses.

Probably the best measure of whether your state government is part of the problem and not the solution is to compare its unemployment level with those in surrounding states. A red alert should sound if your state’s unemployment level is significantly higher.

A solution is within the grasp of the business community to the extent that it identifies sources of the failure of our system to produce more jobs and makes a concerted effort to convince the government to address them. An important fact is that during a recession, a growing number of workers, impatient with being unemployed, create jobs for themselves as independent contractors typically working out of their homes or offices.

Most small businesses start out as individual entrepreneurs operating as independent contractors serving a larger business. After they get their start, they acquire more customers and add employees. These are the seeds from which large and thriving businesses grow. This is why in past recessions independent contractors have served as the engines of job growth.

Regulators and the regulatory process in some states discourage the use of independent contractors. There is a need for effective state administrative procedures acts whereby all proposed regulations are exposed to public comment. Regulators should be prohibited from circumventing the administrative procedures act by adopting internal unpublished guidelines affecting their decisions. Currently some regulators even refuse to issue regulations or guidance to alert the public to their interpretation of the law - which may be inconsistent with the clear language of a controlling statute. In some states, regulators fail to provide business with help in interpreting their regulations, relying on the surprise factor to levy fines on unwitting violators that they then hold up as evidence of their superior performance.

The reason for the low unemployment rates in Germany and the Netherlands is that they have promoted the use of the independent contractors - known in Germany as “atypical” workers.  Is enough being done here in the U.S. at a state and federal level to emulate their example?

Next month, we will feature the work of the Atlantic Legal Foundation. The ALF has a remarkable record of defending the interests of small businesses against the kinds of governmental action that stifle small business growth. It deserves your support.