$1.1 Trillion! That is the annual cost to Americans for businesses to comply with mandated government business regulations, according to the Office of Advocacy of the Small Business Administration. This is more cost per household than the cost of health insurance. Think about it.
Moreover, smaller businesses bear the brunt of these government regulations and pay 45% more per employee to comply with mandated regulations, than big businesses do.
Bear in mind that these numbers are before the new regulations coming out of Congress take effect, e.g. new health care insurance. So this cost will only continue to rise.
And we wonder why small business is not hiring people, and pulling us out of the recession like it has in the past.
Of course you do know, that businesses MUST pass ALL of these costs for government regulation on to the consumers of the goods and services they provide, in order to stay in business?
Question: Isn’t this a hidden tax on every consumer, just to pay for bureaucratic bloated programs dictated by the government?
In Part I of this series (shown below this post), I presented the general findings of the
nonprofit, nonpartisan, public think tank, Information Technology and Innovation Foundation (ITIF), regarding Innovation in the U.S. vs. 40 other leading nations/regions of the world. The ITIF report is based on scientific findings–not opinions–and shows that not only has the U.S. dropped to the number 6 innovator in the world, but also its rate of change (improvement) is dead last.
In the same report, the ITIF also presents those things the U.S., or any nation/region, can do to improve competitiveness and innovation. I have capsulized their suggestions as follows:
- Provide incentives for companies to innovate. Incentives should be in the form of robust R&D tax incentives; accelerated depreciation on new equipment; workforce development tax credits; corporate tax structures that make the U.S. more competitive world-wide; and other incentives that encourage businesses to spend more on innovation.
- Encourage high-skilled immigration. The broader the scope of thinking–the better the likelihood of new ideas and innovation. The U.S. is currently sending high-skilled immigrants home, and that is counter productive in the long-term.
- Promote a digital economy. The U.S. is successful in offering new digital devices and services, primarily to the younger generations, but they haven’t been able to make a mobile phone service that doesn’t consistently drop calls. There are thousands of square miles in the U.S. that have no mobile phone service, and thousands more that have only sporadic service. Also, there are more areas in the U.S. without broadband service, than there are with it. Europe and Scandinavia do not seem to have these problems. [A few years ago, I used a mobile phone near the Arctic Circle in Northern Sweden. Today, mobile phones are totally unreliable in my suburban house in the U.S.]
- Support institutions that are critical to innovation. Not just universities that perform research, but also the kinds of institutions and training-centers that foster commercialization of their research. In addition, there should be more support for local economic development, entrepreneurship development, and workforce training.
- Remove regulations and government policies that retard innovation. Small businesses produce 13 times more patents than large patenting firms, yet spend four and a half times as much per employee in compliance of environmental regulations, and 67 percent more per employee on tax compliance than big businesses do. In the U.S., not only does small business receive very little government support, but it also appears that the government is working against small business through overly stringent regulations of small business.
Well, there you are. That’s what the ITIF believes needs to happen to stop America’s slide into oblivion as a leading innovator in the new knowledge-based innovation economy of the world.
I believe all the above items are well and good–and should be done–but they seem to only address the symptoms. The above are things our government can heavily influence, but I believe the reason for America’s demise as the innovation leader goes much deeper.
Commentators to Part I suggested that the root problem is perhaps a cultural and socioeconomic problem. I believe they are right, and I will soon post, as Part III of this series, my views and concerns on the reasons for diminishing innovation in the U.S., along with what I think needs to be done to improve the situation.
I would also like to hear from everyone out there who has a suggestion on how they think we can bring innovation back to the forefront of the U.S.
American businesses pass on to the American people $1.1 trillion in costs of complying with federal regulations. This is more cost per U.S. household than the cost of health insurance.
Smaller businesses bear the heaviest load of the cost of business regulations. They spend four and a half times as much per employee to comply with environmental regulations, and 67 percent more per employee on tax compliance than big businesses do.
This is data recently released by the Office of Advocacy of the Small Business Administration. The Office of Advocacy has been trying for decades to get many of these regulations modified for small businesses—all to no avail to date.
Yet, small businesses—with fewer than 500 employees—are truly the backbone of U.S. Industry. Here are some little known facts about the importance of small businesses in America:
- Represent 99.7 percent of all employer firms.
- Employ half of all private sector employees.
- Pay nearly 45 percent of total U.S. private payroll.
- Have generated 60 to 80 percent of net new jobs annually over the past decade.
- Made up 97 percent of all identified exporters.
- Hire 40 percent of high tech workers (scientists, engineers, and computer workers).
- Produce 13 times more patents per employee than large patenting firms, and these patents are twice as likely as large firm patents to be among the one percent most cited.
(The Office of Advocacy of the Small Business Administration also recently published this information.)
So, in spite of all the challenges thrown at small businesses…by government agencies and private institutions alike…small businesses have remained the backbone of America’s Free Enterprise system.
Now, with the economy in the tank, our small businesses are in even greater jeopardy. Let us not allow the politicians to build the barriers any higher.