Growth Engines: Ten Ideas to Help Small Businesses Create More Jobs
Who are the real job creators? The Small Business Administration reports that businesses with under 500 employees have created two out of every three net new jobs over the past 15 years. Even smaller businesses – “microenterprises” of less than 4 employees – account for 88 percent of firms, and could get the country to full employment if just one out of every three was able to hire a single new employee. So, what’s it going to take?
Create More Customers
What small businesses need the most, of course, are customers. And what more Americans need in order to be customers again is more jobs that pay incomes above their essential costs.
1. Put Americans Back to Work: With 25 million Americans who can’t find a full-time job, it is past time to simply hire willing workers to help strengthen our country. Dēmos’ Back to Work report estimates that our government could hire 8 million people for less than the annual cost of the Bush tax cuts. Representative Jan Schakowsky has a bill to create new job corps in areas from park improvement to child care. Public jobs are cost-efficient, targetable, and stop the vicious cycle of depressed consumer demand causing private employers to shed workers and cut salaries, which in turn depresses consumer demand.
2. Pass Smaller Stimulus Ideas: Short of a full WPA-style program, there’s plenty we can do today. Raising the minimum wage would increase disposable income without costing jobs; investing in infrastructure would create new jobs,30 percent more of them if we choose mass transit over new roads. It should be obvious, but let’s first do no harm by not letting austerity hysteria summon the ghost of 1937, when FDR cut spending and we plunged back into the Depression. We should also save what meager stimulus we now have from the chopping block: the unemployment insurance extension and Obama’s payroll tax cut. Even better, we can replace the payroll tax cut with a lump-sum tax rebate targeted to more strapped consumers, for 12 percent more jobs created per dollar.
Over the past 30 years, our most successful large businesses have been phenomenally successful at organizing themselves to gain power in Washington. As a result, the interests of entrepreneurs (those who aren’t Wall Street investors) and small business owners have been repeatedly sidelined.
3. Trust in Anti-Trust Again. As Barry Lynn at New America Foundation writes, “The American small business is increasingly becoming an American myth: Self-employment in nonfarm businesses has fallen by nearly half over the past 50 years.” He blames part of the decline on a shift towards corporate consolidation. Anti-trust law enforcement has fallen over this period as policymakers decided to promote different values: efficiency and cheap goods and services over competition and independent ownership. But it’s taken a toll on the middle class and on consumer choice, as a few large national chains (often owned by the same corporation) have increasingly locked up our supposedly free market. It’s time to revive the American value of anti-trust, from retail to farming to banking, to build a true “Ownership Society."
4. Distribute the Power. Today, 3 of America’s largest 5 corporations are Big Oil. If we put a price on carbon and set energy efficiency targets, it would create a gold rush of smaller, service-intensive businesses. Picture local solar and geothermal pump installers, insulators and energy auditors, micro-grid networkers and smart meter technicians – all part of the newly distributed power paradigm (pun intended) of the new clean energy future.
5. Give Small Businesses a Political Voice. As these ideas show, government can help pave the way for tomorrow’s small businesses – but first we need to loosen the political grip of today’s big ones. We don’t always think of campaign finance reform as a tool for diversifying our economy, but it is. The Citizens United decision has signaled that there is no limit to how much political advantage the biggest corporations can buy; we need a constitutional amendment to overturn it. In addition, the Fair Elections Now Act would replace big-money campaign contributions with small dollar donations, perfectly sized for small businesses to contribute in their communities.
Small businesses could save billions on the margin – without reducing wages or risking public health and safety – with a few targeted reforms.
6. Slash Swipe Fees. In a rare Main Street over Wall Street victory, America’s stores and service providers won relief from runaway credit card fees in the Wall Street Reform Act. Shockingly, these “interchange” or “swipe” fees are many businesses’ second-largest expense after employee salaries. The fees have tripled over the past decade to average of 44 cents per swipe, though technology has lowered the transaction cost to only 4 cents. Bowing to intense lobbying by the banks that dominate the Federal Reserve Board, the Fed limited the fees to 21 cents plus .05 percent of the sale in July, far higher than the 12 cent cap they’d originally proposed in December. Given the Fed’s inherent conflict of interest, Congress or the Consumer Financial Protection Bureau could take over and set the cap lower, saving businesses more of their $16 billion annual swipe fee burden.
7. Maintain Health Insurance Relief. Last year, one out of every 3 small businesses reported holding off on hiring because of insurance costs. The Affordable Care Act was a huge step forward. Small employers are now eligible for a tax credit of 35 percent of their health care costs – rising to 50 percent in 2014. That’s already saving a restaurant with 40 part-time employees $28,000 off next year’s taxes. GOP efforts to repeal the law would eliminate these savings and cost small businesses.
8. Tax Internet Retailers. Due to a 1992 Supreme Court decision, your small local bookstore charges you for sales tax while the giant Amazon.com doesn’t. That gives many large e-tailers an automatic discount over your local shop, ranging from 2.9 percent in Colorado to 8.5 percent in California. To level the playing field, Congress could pass a law like the Main Street Fairness Act to allow states to require sales tax collection from large e-tailers. Collecting online sales tax could also eliminate 13 percent of the states’ combined budget gaps, resulting in more local jobs, public services and economic growth.
Increase Fair, Affordable Credit
In July 2010, small business access to adequate credit dipped to its lowest level since the NSBA began recording in 1993. Though it has picked up over the past year, more than 1 out of every 3 small businesses is still unable to get adequate financing.
9. Put Public Banks on their Side. Many states are considering enacting “Main Street Partnership Banks” modeled after the nearly 100 year-old Bank of North Dakota. They would move public funds out of the Wall Street banks that have turned their backs on local lending, and capitalize a new public structure with a mission to improve the local economy. The public banks partner with in-state community banks (which account for more than half of small business lending) to increase their local lending. Oregon almost passed a scaled-down version last year. A fully-operational Oregon bank would help community banks expanding lending by $1.3 billion, give the state $135 million for its Rainy Day Fund and lead to 5,391 new small business and farm jobs in the first 3-5 years.
10. Curb Predatory Plastic. Oddly, credit cards marketed for business use don’t have to comply with consumer protection laws such as the Truth in Lending Act or even the 2009 CARD Act. That means unfair practices like “any time, any reason” retroactive rate hikes or hair-trigger penalties are still legal for the 11 million small business accounts. Congress should extend all credit card protections to all borrowers.