Wednesday, January 29, 2014
With the ongoing debate about income inequality and increasing the minimum wage, it’s important to revisit the basics.
In order to demand a wage increase, you must first have a job. In order to have a job, someone must create that job. In order to create that job, someone must start a business.
But now, when our economy desperately needs more – and better – jobs, a major study shows starting a business in the U.S. is more difficult than ever.
The study by the World Bank and the International Finance Corp. ranked 189 nations on how easy it is to start a new business. They considered the number of procedures required, the paperwork time necessary and the expense.
The U.S. ranked 20th, down from 11th last year. Our showing was well behind countries like Rwanda, Belarus and Azerbaijan. The good news? We narrowly beat out Uzbekistan.
New Zealand is the best place in the world for entrepreneurs, according to the report. Starting a business there requires “one procedure, half a day, (and) less than 1 percent of income per capita and no paid-in minimum capital,” the study noted. By contrast, the U.S. requires, on average, six procedures, takes five days and requires 1.5 percent of the income per capita.
Why is this important? Because most jobs are created by small businesses, and research shows that economic growth is driven by the entry of new businesses rather than by the growth of existing firms.
Chances are we wouldn’t be debating income inequality or minimum wage if we had a robust, expanding economy creating millions of new jobs.
However, an annual avalanche of federal and state regulations is making it increasingly difficult.
How does Washington rank? It depends on whom you ask.
Chief Executive magazine ranked Washington 36th out of the 50 states in 2013, up one from the previous year. While we get good marks for quality of life and work force, we take a hit when it comes to taxes and regulations.
Forbes magazine ranks Washington 9th overall, but places us 27th in business costs and 32nd in regulatory environment.
The bottom line is this: While news coverage tends to focus on “big business”, most jobs are created by small business. Elected officials in Washington, D.C., and Olympia – most of whom have never run a business – should keep that in mind when they consider imposing new regulations and taxes.
Don C. Brunell is a business analyst and former president of Association of Washington Business.
Email him at TheBrunells@msn.com..