Regulatory Overkill is Strangling Small Businesses
By Robert Heiblim
Neither Donald Trump nor Hillary Clinton — both of whom have expressed support for small business — have detailed how as president they would lift the crushing burden of regulation off the backs of small businesses like mine. Complying with today’s ever-growing list of federal rules requires an inordinate amount of time, money and attention — resources that could be used in other ways.
Small business owners — who create a large majority of the economy’s jobs — are hoping the two candidates will be pressed for specifics, not just generalities, on the subject during the first presidential debate on Sept. 26 at Hofstra University.
If the candidates need a briefing book on the topic to prepare for the debate, the Consumer Technology Association’s (CTA)TM Innovation Scorecard, which ranks the states on how supportive (or not) the regulatory climate of each is in encouraging economic innovation and job creation, would be a good place to start.
For my firm, Blue Salve Professional Consulting, which works with clients who make electronic and digital products and services, these three rules are breaking their businesses:
Obamacare requirements are weighed down in paperwork. Our firm is small, as is another business I operate. Both of them are too small to require health care for employees. I provide it anyway, but the paperwork burden and cost is substantial. This is a clear example of well-meaning legislation having unintended side effects.
We see this in the (still) rapidly rising premiums and related costs. And it affects how we hire. One of my businesses, for example, requires staff in most states at different times — you can imagine the overall federal and state regulatory burden that brings with it.
To stay on the right side of regulations, businesses large and small have to pay lawyers, expert consultants, accountants and staff to prepare paperwork or do other things to be in compliance, most of it with scant actual benefit to any stakeholders.
H-1B visa shortfall makes it harder than ever to hire the best and brightest. High-skilled immigration allows the U.S. to attract the best and brightest minds to help develop and maintain the cutting-edge technology.
Last year, U.S. Citizenship and Immigration Services received 233,000 applications for just 85,000 H-1B visas. Artificially low caps on the number of high-skilled visas available and limits on permanent visas turn away thousands of highly-skilled immigrants. This forces many companies to leave the U.S. — costing us more than 500,000 jobs a year and encouraging foreign nationals, many of whom are U.S.-educated, to return home and found companies that compete against ours.
I often work with universities to conduct research and testing as they not only offer the freshest ideas, they are also a great source of talent. To that end, I have successfully and unsuccessfully cycled through the H-1B visa process. I am proud that one of my hires not only performed extremely well for me, but went on to much greater success with a major U.S. company.
Unfortunately, my more common experience has been failing to keep talent here. Another potential hire I tried to take through the obstacle course of red tape had to go home — despite good legal support. Today he has built an impressive global business in India which employs several hundred employees. These jobs and taxable revenues could have stayed here in the U.S. Instead we educated him here and then forced him to leave — a waste of talent for our country.
The Department of Labor’s overtime rule forces startups to limit productivity. As of December 1, employees who earn less than $47,476 annually will be eligible for overtime pay, according to a rule enacted this year by the Labor Department. This law will force employers to pay more than they budgeted for, raise base salaries or cap hours at 40 per week — all of which are particularly hard for startups and small businesses trying to grow quickly and strategically.
This is a real and current situation for me in one of the businesses I operate. I have already had to limit hours for one employee, despite the fact that she would like to work more. While we pay her hourly, her rate is high and she is quite satisfied. Imagine her surprise to learn I would have to pay her time-and-a-half for work she was happy to do at her standard pay rate. The result? It now takes more time and her earnings are limited.
This is another great example of good intentions gone wrong. While rules may have the public good in mind, the implementation can have the opposite effect. In this case, it did immediately lead to limiting earning opportunity for a relatively wide range of employees who already earn well above the minimum wage and poverty level.
Both presidential candidates promise to create jobs and support small businesses. At Monday’s debate, the litmus test should be whether the candidates acknowledge the heavy burden that job-killing federal regulations place on businesses, large and small. And the real debate will be over what they propose to do about it.
Robert Heiblim, co-founder of Consumer Technology Association member company BlueSalve Professional Consulting and of Interim Management, is a member of several CTA boards.