There is Job Creation and Then There is Job Creation

by Michael Haberman on February 17, 2012 · 3 comments

I think most people will agree that today the standard for job creation is being carried small businesses. If you don’t believe me then perhaps you will believe the Small Business Administration who published these figures:

Small firms:

  •  Represent 99.7 percent of all employer firms.
  •  Employ half of all private sector employees.
  •  Pay 44 percent of total U.S. private payroll.
  •  Generated 65 percent of net new jobs over the past 17 years.
  •  Create more than half of the nonfarm private GDP.
  •  Hire 43 percent of high tech workers ( scientists, engineers, computer programmers, and others).
  •  Are 52 percent home-based and 2 percent franchises.
  •  Made up 97.5 percent of all identified exporters and produced 31 percent of export value in FY 2008.
  •  Produce 13 times more patents per employee than large patenting firms.

That is job creation! But then there is the negative effect of government regulation. Increasing government regulation increases costs to small businesses thus limiting, if not prohibiting, them from hiring workers. Some people say increased regulations often increase employment as well, and that may be true. It is certainly true in the Department of Labor. There are several hundred more people working there now that the USDOL has stepped up its enforcment efforts. And it is good that they have jobs. But is that really the kind of job creation we want to have? Those jobs do not, in my opinion,  add value or wealth to society as a whole.

But I guess I should not complain too much all those increased regulations and regulatory efforts keep me in business.

Tell me what you think.

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{ 3 comments… read them below or add one }

Dave February 17, 2012 at 9:56 am

Bureaucracy has one goal: to grow. And government bureaucracies, which have no bottom line ( in the sense they don’t have to worry about being profitable), are the worst offenders. There’s a tipping point in government where if it gets too big, the private sector will exist solely for the purpose of supporting it.

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john October 30, 2014 at 12:22 am

Some of the new health and safety regulations in the UK now require scaffolding to be used instead of ladders, for seemingly small pathetic jobs. I was curious if the expensive scaffolding is outsourced to companies that are either friends of the regulators or companies created by the regulators themselves to put money in their pockets.

What do you think?

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Michael Haberman October 31, 2014 at 9:37 am

John, you never know. Small businesses are often burdened by an expense that is seldom considered by the regulators.

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