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Tuesday, Jul 23, 2024

Commentary The first stirs of an awakening economic giant

It is time for this giant to rise. It is time people, particularly lawmakers, stopped and looked up at the real titan of the American economy.

It is time for the people who sign paychecks for six of every 10 working Americans to muscle aside the heavily hair-sprayed corporate heads for the attention they deserve.

The National Federation of Independent Business, America’s largest small-business advocacy organization, has formed its first California Local Action Council. Mark this down as the date our economy’s Gulliver started snapping the strings put on him by the legislative Lilliputians running around our state capitals and in Washington, D.C.

The first Local Action Council was established in Los Angeles. LACs of between eight to 12 core NFIB members are planned throughout California. They will serve as the vehicle for lobbying activities such as amassing the troops, staging rallies, conducting massive communications campaigns, organizing group visits to lawmakers and media, and providing expert testimony to legislative committees. In addition, LACs will work to raise money and campaign for pro-small-business candidates for state and federal office.

Small-business owners realize they can’t compete with the celebrity power of corporate executives, but they can make certain elected officials know they are greater in number, more influential in their communities, and increasingly active. Local action councils will work to harness that energy.

In other words, small business plans to start showing up early, staying late, and making noise. This should cause some consternation to the bureaucrats and legislators use to pusillanimously acquiescing to cause groups whose influence is wildly disproportionate to the amount of actual members in their organizations. NFIB is 600,000 strong nationally with 38,000 members in California.

Small Is Big

Small business is big. More than 60 percent of all businesses in the United States employ between 0 (the self-employed) and four people. Another 18 percent have between five and nine workers. Throw in the 11 percent of companies with between 10 and 19 employees and the total amount of American businesses with fewer than 20 workers comes to about 90 percent.

Small business is vital. Not only do small businesses provide most initial and on-the-job training for American workers, they are more likely to employ women, younger workers, older workers, and welfare recipients.

According to Cognetics, Inc., 60 percent of the 11 million net new jobs added to the economy between 1994 and 1998 were generated by firms with between one and four employees.

Companies with between five and 19 employees contributed another 18 percent. No corporate downsizing going on here.

Small business , not corporate employment , is the American dream. Twelve million Americans list their principal occupations as owning or operating a small business. Another 12 million list part-time income from a small business they own or operate.

But for its paramount contribution to the American way of life, the cries and pleas of small business fall on deaf ears. When Boeing announced recently it was moving its corporate headquarters out of Seattle, the state’s lawmakers and media were aghast and taken aback, although small-business owners had been warning about the same economic conditions that forced the giant airplane maker to flee for years.

While a complete absence of media star status explains part of the difficulties small businesses face in making their case heard, another lies in the inability of policymakers to appreciate a fundamental difference between small business and its bigger sisters.

Big But Fragile

As big as small business is, it is also fragile. Seven out of 10 small-business owners start their enterprises with less than $20,000 in capital, which , at least for the vast majority of NFIB owners , comes not from banks or SBA loans, but from their own savings or credit cards or family. When the firm is up and running, the typical small-business owner will earn about $40,000 a year from it.

The biggest threat to small-business solvency comes not from the natural vagaries of the marketplace, but from federal and state governments. Of all the facts that support this statement, nothing is stronger than this: the cost to small business of complying with all the rules and regulations thrown at it by all levels of government is almost double that of big companies and mammoth corporations.

The regulatory costs per employee for businesses with four employees or fewer averages $31,748. For companies with more than 500 employees, it is $16,241.

Anytime government wants to increase taxes even 1/10th of a percent or force a health insurer to add a new procedure to their plans, a large corporation can absorb the cost by spreading it out over a greater pool of employees. Not so with a small business.

Making bureaucrats and lawmakers aware of this is the most important educational mission of local action councils. Although increased media exposure for the plight of the small-business owner is a goal of the LACs, more important to their mission will be packing committee hearings, swelling legislative hallways, and using their loud, new megaphone , the ballot box.

The giant is rising.

Hopper is California state director for the National Federation of Independent Business.


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