Are Regulations Discouraging Entrepreneurship?

By: Jake Clabaugh, WIPP Government Relations

Is the federal regulatory process stacked against entrepreneurs? The Joint Economic Committee sought to answer this question during a hearing entitled “Encouraging Entrepreneurship: Building Business, Not Bureaucracy.” The Committee’s Vice-Chair, Pat Tiberi (R-OH) opened the hearing with this direct question to witnesses: Is the thicket of government bureaucracy strangling private initiative?

Before taking on the Vice-Chair’s question, the witnesses began by framing the landscape. Entrepreneurship – the birth of new firms – has been trending downward since President Jimmy Carter’s Administration in the 1970’s. Dr. Tim Kane, a Research Fellow at Stanford University’s Hoover Institution, highlighted the decline in the number of startup firms from 16% of total firms in the U.S. in 1977 to just 8% today.

Despite the decline in overall start-ups, National Women’s Business Council (NWBC) Chair Carla Harris lauded the growth in women-owned businesses. Since 2002, the number of women-owned firms has leaped from 6.5 million to 10 million. Women are creating businesses at 2 -1/2 times the national average. The progress made by women business owners provided a bright spot in otherwise gloomy testimony on the outlook for entrepreneurs.

When the witnesses were asked what regulations were causing the most headaches, the Affordable Care Act (ACA) was the most commonly cited culprit. Specifically, the ACA defines a full-time employee as an individual working thirty hours a week instead of the traditional forty. This definition determines whether a business is exempt from the employer mandate. The witnesses echoed the experiences of many WIPP members who have found the thirty-hour workweek definition detrimental.

To tackle this and other regulatory challenges, WIPP partnered with the National Association of Manufacturers, Small Business & Entrepreneurship Council and International Franchise Association to launch Rethink Red Tape.  As part of this initiative, WIPP will be calling on policymakers to produce better, fairer rules. In the opinion of the Joint Economic Committee and WIPP Members alike, regulatory reform will be a win for entrepreneurship.