One of my own teachers, Gary Scott, recently ran a newsletter article that pointed out how much harder it is to be a successful small business owner in the United States than in years past. Here's a quote from Gary's article that points this out:
“One of the greatest assets in America was that it was the easiest place to start and run a small business. According the US Census statistics small businesses comprise 64 percent of net new private-sector jobs, 49.2 percent of private-sector employment, 43 percent of high-tech employment and 33 percent of exporting value.
Regretfully, as a chart from the World Bank shows, this is no longer true. When it comes to starting a business, the land of the free is not even in the top ten. America is not even close, ranked low in 20th place. Small businesses are not so free anymore and the trend is getting worse.”
Gary went on to quote from an attention-getting article that ran recently in The New York Times. I strongly suggest you take the time to read Morris Kleiner's article “Why License a Florist?” He points out that one of the fastest growing labor market institutions in the U.S. is the government licensing of jobs. Consider these eye-openers from Kleiner's article:
- It takes more classroom time to become a cosmetologist than an attorney in Minnesota.
- Louisiana now requires a license to become a florist.
- In the 1970's about 10% of the work force was required to have a license, by 2008 that had risen to 30%.
As Gary pointed out, “We are choking small businesses by creating one of the fastest growing labor market institutions in the United States: government licensing of jobs.”
I've said for years that the cost of getting started in business (if you do it legally) prevents Americans from even trying to become self-sufficient and self-employed. Workers in a certain field often look to licensing as a way to seem “more professional” to their customers and clients, only to find that they have added hundreds (if not thousands) of dollars to their cost of staying in business with little or no benefit to their bottom line.
I'm a licensed massage therapist in Tennessee and have been for over 15 years now. When Tennessee became a “license required” state not a single massage therapist raised their prices as a benefit of licensure. We all, however, have spent many thousands of dollars maintaining our licensing and obtaining the required continuing education. Licensing feeds the pockets of an entirely new subsection of state bureaucracy but does nothing to help sustain a business. In fact you can waste hours of your time just trying to get someone on the phone.
It's my belief that in a truly free market the best in business will rise and the worst in business will fall. Contrary to what we are taught in school, we do not have a truly free market in this country. While small business owners account for 64% of newly created jobs we don't get help to stay in business. No one comes to bail us out when we get underwater financially. The very banks that our tax dollars have bailed out would not in turn lend a helping hand to the vast majority of small business owners.
Why is it hard to be successful as a small business owner? Because we don't have the clout to have a strong voice in national or state policies that take our money for unhelpful things like licensing monks to sell coffins in Louisiana (a law that was on the books for years and was finally changed). It's smart to be aware of this fast-growing government business of licensing. As a successful small business owner I need to be savvy, and so do you.