Healthcare costs still a major issue for small businesses

According to a new Wells Fargo/Gallup Small Businesssurvey, Obamacare can’t get here quick enough.  The poll released this week found that 54% of the small business owners surveyed said that healthcare costs were hurting their operations a lot and 19% said hurting them a little. 

Now what Gallup doesn’t tell us is whether these business owners presently are providing healthcare to their employees or aspire to do so if costs can be brought down.  But either way, healthcare continues to be on the minds of small businesses. 

The hope is that Obamacare will start bending the curve of healthcare costs to make insurance more affordable.  That’s the goal.  But one thing we know for sure, the status quo before healthcare reform wasn’t getting the job done. 

Tidal wave of lies

There are three main things holding the small businesses back in North Carolina, says Gregg Thompson the National Federation of Independent Business (NFIB) in that state.  “One is regulations, one is health care and one is taxes.”

Mr. Thompson’s comments were part of a nine-state “Stop the Tidal Wave” anti-regulations campaign recently launched by the NFIB and its new national project, Small Businesses for Sensible Regulations (created one year ago and now with an unimpressive 1,333 members).  The effort will include paid advertising and, of course, a lot of fear mongering about how we’re all going to be washed away in a tsunami of federal regulations.  Not present regulations mind you.  But future, mostly unspecified regulations.  Are you scared yet?

To buttress their argument that regulations are the number one problem for small businesses the NFIB cites a February Gallup poll as one demonstrating that “regulatory burdens are a top reason why small businesses are not hiring at pace with previous years.”

But as most polls have shown, regulations are not the reason small businesses are not hiring.  It’s the lack of demand. 

Even the Gallup poll the NFIB references says that. 76% of the small-business owners Gallop polled who were not hiring said that they do not need any additional employees and 71% said they were worried that sales won’t justify adding employees.  “Companies typically hold back on hiring when the economy is weak and when their operating environment is not providing sufficient revenues or cash flows.  This appears to be the case right now,” said Dennis Jacobe, chief economist for Gallup.

However, 48% of the business owners not hiring did say they were worried about the potential cost of healthcare and 46% were worried about new government regulations.  But these were concerns about something potentially happening in the future, worries ginned up by the NFIB’s relentless politically motivated PR campaign against the Obama Administration.  Mr. Jacobe refers to these concerns as “exacerbating an already uncertain and difficult situation.”

In other words, lack of demand is the driver of lack of new jobs, not concern about regulations and healthcare.  If it were the latter, no small businesses would be hiring but the truth is that small businesses are leading the new job creation in this country. 

When Gallup asked small-business owners why they were hiring new employees, 64% cited increased consumer or business demand and 55% said that sales and revenues justify adding more employees. 7% even cited government tax incentives as the reason (you won’t hear the NFIB talking about that). 

So while the NFIB misrepresents the Gallup poll findings, Mr. Jacobe throws cold water on the NFIB bogus claim that small-businesses owners are shaking in their boots over future new regulations.  “Right now,” he says, “economic confidence is approaching its highest levels in the last four years.  U.S. small-business owners are also about as optimistic about their business and their future hiring as they’ve been at any point during that time.” 

This is exactly what the NFIB political machine is afraid of—small business optimism.  It must be stopped.  Thus their 9-state anti-regulation campaign built on distortion and lies.

Gallup misleading Congress and public

Tomorrow the U.S. House Committee on Small Business holds a hearing featuring the results of a Gallup poll conducted in October last year.  The title of the hearing is The Path to Job Creation but the better title might be The Path to Deceiving Congress.   

The issue is the role government regulations play in small business job creation.  The GOP mantra this election season is that regulations are hindering job growth and must be eliminated or severely reduced.  Last year the House passed numerous bills to do just that.  Those bills are now in the Senate where the majority party has a different perspective on regulations and what really is holding back growth in small business—lack of cusumer demand.

The preponderance of polling results last year clearly indicate that the lack of customers is the main reason small businesses have not been able to more vigorously lead us out of the Great Recession as they have in other downturns.  But the anti-regulation crowd has been trying to use the recession both to eliminate regulations opposed by big business and as a partisan weapon in this year’s elections.

The hearing tomorrow looks like an effort to elevate the regulations issue for the media and public and force the Senate into taking action on the anti-regulation bills the House has sent it.

This is where the Gallup poll comes into play.  According to that poll, 22% of small business owners said that complying with government regulations was the most important problem facing small-business owners today.   Gallup’s analysis of this open-ended question (respondents were not given answers to choose from) showed that of all the responses, “regulations” was the number one answer.

I have a Master’s degree in Social Psychology.  But familiarity with opinion polling is not needed to bust Gallup on this poll result. 

First, using an open-ended question is troubling because the decision of how to categorize each response is subjective.  A response might contain mixed messages and thus must be interpreted giving the Gallup employee the final say on what the small business owner really meant in answering the question.  At this point the employee’s own biases (or the biases of the employer) come into play throwing the accuracy of the poll results into question.  It is interesting to note that this was the only open-ended question apparently used by Gallup in this poll.

Second, Gallup’s reporting of the answers to this question clearly shows an effort to obtain the results they wanted.  Here is how Gallup listed the results:

What do you think is the most important problem facing small-business
owners like you today? [OPEN-ENDED]

Complying with government regulations                           22%
Consumer confidence                                                      15%
Lack of consumer demand                                              12%
Lack of credit availability                                                 10%
Poor leadership/Government/President                             9%
Cash flow                                                                        7%
New healthcare policy                                                      5%
Competition from big business and overseas                     4%
Lack of jobs                                                                    4%

It is not hard to see that the responses of “consumer confidence” and “lack of jobs” are simply explanations for why there is a “lack of consumer demand”.   Combining those responses we find that 31% of small-business owners identified “lack of consumer demand” as their number one response far exceeding “complying with government regulations”.

We can even make the argument that “cash flow” is a problem because of “lack of consumer demand”.  That would show 38% of the responses being “lack of consumer demand”. 

Third, Gallup only gives us 88% of the responses to this question.  Were the remaining answers so nebulous or divergent that they weren’t of value?  Shouldn’t the number of these unreported responses alone have told Gallup that the open-ended question was a problem.

So now we know how Gallup was able to report the response to the question the way it did.  Now the question is why?

The answer is clear.  This was a Wells Fargo/Gallup poll.  Wells Fargo and the other big financial giants have been vigorous opponents of the regulations coming from the passage of Dodd/Frank that is designed to protect all of us, including small businesses, from another Great Recession.  Only the petroleum/coal industry has been trying harder to turn government regulations into the boogeyman responsible for all the country’s economic problems.

The PR tactic to bash regulations has been to convince Congress and the public that regulations are hurting small businesses.  But as previously noted much of the survey work last year on the issue didn’t come to that conclusion.  Tomorrow, results of another poll will be released by three national business organizations—American Sustainable Business Council, Main Street Alliance and Small Business Majority—again throwing water on the anti-regulation rhetoric.

It is obvious that Gallup was trying to deliver to its financing partner a response the anti-regulation folks could promote.  Hence the hearing tomorrow featuring Dr. Dennis Jacob, Chief Economist of Gallup, who will talk about the poll.

But to Gallup’s credit it did ask another question with structured responses that undermines the result produced for Wells Fargo. 

Thinking ahead to 2012, what would be a primary motivation or reason
for hiring and new employees?

When revenues or sales have increased                            27%
When the economy improves                                           20%
If you need to support growth or expansion plans             17%
If you need to replace an employee who left                     10%
Having tax credits for hiring unemployed workers             7%
Some other reason                                                           7%

That’s essentially 67% of small-business owners saying “increased consumer demand” will lead to job growth.  Maybe the “when regulations are reduced” answer is buried in the “some other reason” response.