(Christina Walsh) – Unemployment in America has now topped 9.5 percent for 14 straight months—the longest stretch since the Great Depression. Nearly 14.8 million people were unemployed last month.
So how can Americans create private sector jobs?
The solution to America’s jobs problem lies not with budget-busting federally mandated “stimulus” programs. Instead, what is needed are specific reforms that wouldn’t cost taxpayers, would create a broader tax base for cash-strapped cities and states, and would provide opportunity for millions of Americans who worry where their next paycheck is coming from.
As demonstrated by a series of eight new reports issued today by the Virginia-based Institute for Justice, one of the principal obstacles to creating new jobs and entrepreneurial activity in cities across the country is the complex maze of regulations cities and states impose on small businesses. IJ’s “city study” reports are filled with real-world examples of specific restrictions that often make it impossible for entrepreneurs to create jobs for themselves, let alone for others.
Chip Mellor, the president and general counsel of the Institute for Justice, said, “If the nation is looking to the federal government to create jobs in America, it is looking in the wrong place. If we want to grow our economy, we must remove government-imposed barriers to honest enterprise at the city and state levels. Remove those barriers, and you will see a return to the optimism and opportunity that are hallmarks of the American Dream.”
IJ’s eight reports document how irrational and anti-competitive regulations block entrepreneurship. More often than not, these government-imposed restrictions on economic liberty are put in place at the behest of existing businesses that are not shy about using government force to keep out competition. The Institute for Justice’s city studies examine regulations imposed on a wide range of occupations in Chicago, Houston, Los Angeles, Miami, Milwaukee, Newark, Philadelphia and Washington, D.C.
“At a time when our nation has lost millions of jobs, the Institute for Justice has identified specific regulations in specific cities that, if removed, would result in greater opportunity and greater employment in these cities,” said IJ Senior Attorney Dana Berliner, who edited the reports. “These are the kinds of reforms we’d love to see pursued not only in the cities we feature, but also across the nation. Americans are crying out for limited government and greater economic opportunity. Implementing the reforms we urge in these reports is a cost-free way to achieve both.”
Berliner cautioned, “From outright prohibitions on occupations, to antiquated laws and hostile city staff, to a bewildering array of regulations, permits, taxes and fees, state and local governments often see it as their mission to stifle new businesses and innovative ideas. If cities want to see genuine and long-lasting growth, they must remove these crushing burdens and allow entrepreneurs to flourish.”
What kinds of barriers to creating new businesses did the IJ studies find?
• In Chicago, not only is making food for commercial purposes in a home-based kitchen illegal, but there are layers upon layers of regulations, inspections and ongoing reporting requirements at both the city and state levels for prospective food-service entrepreneurs to navigate. An exhaustive review of these sources alone would take dozens of attorney-hours and cost the would-be entrepreneur as much as $25,000—a process hampered by the government’s vague or ambiguous language in forms and applications.
• In Houston, the city has drastically reduced advertising options for small businesses that rely on simple paper signs to attract customers and stay in business. In the name of “beautification,” it is now illegal for businesses in Houston to cover 20 percent or more of any glass storefront with advertising unless they obtain a permit for each sign. As a result of this and other ill-advised government-imposed restrictions, the simplest and most traditional form of advertising—putting a sign up in your window—has been dramatically limited. The result? Fewer customers for small businesses, fewer choices for consumers and fewer taxes collected to fund city services. In short: everyone loses.
• In Los Angeles, to operate a used bookstore, the government demands that the owner get a permit from the police; record the personal information of everyone who brings in books for exchange or resale, including their names, addresses and book titles; and make this information available to the police. In some cases, the bookstore owner even has to thumbprint patrons who bring in books and file daily reports with the police. All this to merely buy and sell books.
• In Miami, like many other cities, vending is severely limited. Only 75 total vending permits may be issued each year for the downtown area. (Only 17 have been distributed so far this year.) Miami limits vendors to selling only food or flowers, and the application process is difficult and expensive and, worse yet, the applicant must secure all government-issued permits and insurance before applying and then endure a yearly “lottery” to see if he or she will actually receive a permit after having spent so much time and money.
• In Milwaukee, as in many cities, home-based businesses must either comply with a set of needlessly restrictive requirements or operate illegally. Among many other government limitations, in residential zones, only residents of the dwelling may be employed in the home business; even bringing in one assistant who does not live there violates the law. Only 25 percent of the usable floor area of the dwelling unit can be used for the business, and only 50 percent of the garage can be used for storage. Such restrictions are especially outdated in a new, information-based economy reliant in many ways on knowledge-workers. Home-based businesses can provide an opportunity for people struggling to find a job to create their own businesses, and many people with children juggling careers and families appreciate the flexibility of working from home, but in Milwaukee, they aren’t welcome.
• In Newark, as in most other big cities nationwide, the local taxicab market is bound up in so much red tape that taxi medallions cost as much as $300,000 and starting an independent taxi business is next to impossible. Newark’s government-imposed cap on the number of taxis that can operate in the marketplace has created a taxi culture that is notorious for bad service.
• In Philadelphia, the city’s zoning and permitting processes form a pervasive “culture of no” that, for most entrepreneurs, is almost insurmountable. At every turn, would-be entrepreneurs are beset by rules, regulations, and city employees whose mission often seems to be to say “no” to a new business in whatever way possible. And not only does the city’s outdated zoning code forbid huge numbers of basic land uses in most areas, the only way to escape from the code’s strictures is to ask for a special variance from the city’s Zoning Board of Adjustments (also referred to as the Board of Appeals), a bureaucratic body that operates with essentially unlimited discretion—and acts like it.
• In Washington, D.C., to give sightseeing tours for compensation, the District requires you to first get a government-issued license. Similar requirements exist in Philadelphia and elsewhere. So, as tour guides pass the National Archives, which houses originals of the Constitution and the Bill of Rights, they don’t have the freedom to describe those charters of freedom without first getting the government’s permission.
According to the Small Business Administration, last year there were approximately 27.5 million small firms in the United States, which employ nearly 60 million people. These businesses accounted for 65 percent (or 9.8 million) of the 15 million net new jobs created between 1993 and 2009.
Mellor said, “To realize entrepreneurship’s full potential, city and state governments must recognize that the best thing they can do is just get out of the way and let entrepreneurs—the people who know how to create jobs—do just that.”
The transformative power of eliminating these barriers to entrepreneurship isn’t theoretical. Earlier this year, the Institute for Justice released “The Power of One Entrepreneur,” a series of reports that showed how, when entrepreneurs were able to overcome government-enforced limits to pursue an occupation, each of these entrepreneurs not only created jobs for themselves and for dozens of others, but they also strengthened the social fabric of their communities through philanthropic efforts—none of which would have occurred if the government roadblocks had remained in place.
IJ’s “Power of One Entrepreneur” reports featured a New York commuter van driver, a Tennessee funeral home owner, a Texas high-tech entrepreneur, a Mississippi hairbraider and a Washington state bagel baker, each of whom had a profound and positive impact on the world around them only after big government barriers to earning an honest living were surmounted.
Mellor concluded, “The power of one entrepreneur is the key to helping our nation recover from this economic slump. It is a key to restoring our inner cities and countless lives through honest enterprise. How can we create long-term, dynamic growth? That power lies where it always has in America: in the power of one entrepreneur.”
(Christina Walsh is Director of Activism and Coalitions for the Institute for Justice)