Historically 70% of job growth in the U.S. has come from the small business sector – including the world of start-ups in Silicon Valley and elsewhere. While small businesses are known for their agility – out of necessity – they are also much more susceptible to the vagaries and uncertainties emanating from Washington, DC these days. This presents a daunting challenge to entrepreneurs, who commit their personal wealth to hire employees in anticipation of economic and business growth and resulting higher profits.
Adding employees for a small business requires a level of certainty regarding each prospective employee’s cost and productivity. Uncertainty is the enemy of small business job growth and Washington continues to add layer upon complex layer of uncertainty at the foot of small business management. Through increased health care costs, carbon regulations and resulting taxes, proposed higher capital gains taxes and a host of new and yet evolving regulatory requirements – the Government has almost forced a “No Hiring” policy on many small businesses. On a risked adjusted basis, its tough for most small business to justify hiring – over and above an absolute minimum – at least until the implications of these changes can become clear – with time. And time is what we do not have.
Maslow’s hierarchy of needs clearly points to our national priority today – put America back to work. It’s time to step back from the current health care morass and restart the reform effort – with a focus on regulatory changes that can increases the competitiveness of health care and reduce costs. Let’s suspend initiatives that will increase taxes – at least until there are more of us working to pay those taxes. If we want to stimulate the economy, let’s do it with policies that encourage spending and investment in the private sector. If we want job growth, its time we focus on encouraging the job creators to start hiring as opposed to forcing many of them onto the side lines.
America’s small businesses, including our start-ups here in Silicon Valley, are the machines of innovation and job growth. Job creation in America will be led by these innovators and entrepreneurs. If we want to truly unleash their potential, we need clarity and simplicity from our Government leaders and regulators. What we are getting instead is management by Government fiat, a wholesale restructuring of the regulatory environment, new Government mandates with uncertain implications and a rhetorical assault on success. While the Government is focused on bailing out Wall Street – perhaps they could just get out of the way of the rest of us.
The stakes could not be higher. 2009 saw the U.S. economy challenged in ways unparalleled in recent decades. A weakened banking system, the housing market in free fall, the dollar under tremendous pressure in global markets are all reflective of the breadth and depth of our continued economic crisis. But true measure of the challenges we face however lie in U.S. unemployment statistics.
In 2009, more than 20 million people collected unemployment benefits in the U.S. – a record. The year ended with the domestic jobless rate in excess of 10 percent – a figure that excludes those who have become frustrated and ended their search for employment. While year end figures showed hopeful signs that the rate of job loss was slowing, we are far from being out of the woods when it comes to putting America back to work – 15 million Americans are out of work as we enter 2010.
Through a variety of stimulus and “make work” programs, the U.S. Federal Government has sought to jump-start the economy and reverse the contagion of job loss and economic contraction. With hundreds of billions of stimulus dollars committed – the early results to date can only be considered disappointing. Shovel-ready projects were found lacking, statistics around job creation have universally been cited for their exaggerations and where there has been job growth, much of it has been in short term hiring for “stimulus projects” or adding employees to government roles. Nowhere have we seen the type of sustainable, long term job creation that will be required to restore our economy’s vitality, put 15 million of our fellow citizen’s back to work, support the growing standard of living all American’s desire or provide the economic base our country desperately needs in order to pay its bills let alone meet our debt obligations. Simply stated, the Federal Government can not and will not create the jobs our economy requires in order to be successful and viable on a long term basis. Its time to unleash the potential of our entrepreneurs – and for the Government to get out of their way.
Bob Ackerman is the founder and managing director of Allegis Capital (www.allegiscapital.com), a seed and early-stage venture firm headquartered in Palo Alto, California. Ackerman has worked with more than 50 corporate investment partners over the past 20 years as both a venture capitalist and a startup executive. Read his past blog posts here