Is Government Regulation Good for Small Businesses?

5 June 2017

Many people in the small business world often complain about too much government regulation. Small business owners often object to strict anti-trust laws and complain about higher taxes. Some feel that government intrusion in small business is a senseless waste of valuable time and eats away at a company's bottom line. However, some small business owners believe government regulation is good for their bottom lines.

Whatever side of the argument you are on depends on the type of business you have and whether or not government regulation helps or hinders your business. According to Entrepreneur Magazine, the cost of government regulations for small business rose by $70 billion during President Obama's first term. The Heritage Foundation reported a poll showing government regulation went from a small business owner's fourth biggest problem, behind sales, taxes and insurance, to the number one problem from 2008-2013.

As government regulation continues to increase, small business owners face higher fixed costs associated with new regulations. In order to adhere to new government regulations, many companies face the burden of higher per-employee costs. As fixed costs rise, the bottom lines of many small business owners deteriorate.

Opponents of small business regulations argue that government regulation hurts the U.S. economy. Some feel that regulations hinder growth and the creation of new businesses. Opponents point to research by economists from the World Bank who state that government regulation has a negative impact on business investment by increasing the operational costs of many companies.

In 2011, then President Barak Obama stated in a Wall Street Journal op-ed piece that government regulation over small business was out of balance, and those regulations placed an undue burden on small business owners. He stated that the regulations stifled innovation and had a "chilling" effect on the ability of companies to grow and create jobs. The president at the time called for local, state and federal agencies to ease the burden on small business owners.